Moneylife Foundation, in a letter to RBI governor, has requested Dr Rajan to investigate frequent debt restructuring of Lanco group and role played by L Rajagopal, the suspended Congress MP from Vijaywada
Moneylife Foundation has sent a representation to Dr Raghuram Rajan, governor of Reserve Bank of India, requesting him to investigate about role played by L Rajagopal, the suspended member of Parliament (MP) from Vijaywada and frequent debt restructuring of his Lanco group.
"As savers, we want to question the growing cost of banking services to us, because people like Mr Rajagopal are recipients of reckless lending and frequent restructuring. Sir, this man, who called parliamentarians a 'mob' in an interview to Rajdeep Sardesai of CNN-IBN; who as an MP does not seem to understand the sanctity of the august house, has been considered fit to be extended fit to get a Rs9,000 crore reprieve from out nationalised banks. We believe that the RBI is ultimately accountable for such excesses by nationalised banks at the cost of the people of India," the representation reads.
The representation says, "Moneylife Foundation requests you to order an investigation into the corporate debt restructuring (CDR) and to make public all the documents pertaining to the CDR of Rs9,000 crore and the basis on which banks colluded to offer this reprieve to Mr Lagadapati Rajagopal. Why is the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 (SARFAESI Act) not invoked against Lanco?"
The Lanco CDR is not an isolated case. Earlier in March 2012, several eminent social activists including Aruna Roy, Nikhil Dey, EAS Sarma, Prashant Bhusan, Jayati Ghosh, and others urged the UPA government to change the management and liquidate personal assets of Kingfisher Airlines chairman Vijay Mallya, also Rajya Sabha MP, to save the carrier. (Don’t change aviation policy for Kingfisher Airlines, urge activists)
Coming back to Lanco, as reported last week by Moneylife, Lanco, which is in the debt restructuring process, has also been frequently involved in a number of controversies.
"(Lanco's) key businesses have been frequently involved in a number of controversies. In 2007, (its) managing director GV Babu was caught at an airport with a suitcase containing Rs34 lakh in unaccounted cash. Repeatedly tarnished by charges of corrupt practices and contract irregularities, Lanco Infratech Ltd ran into financial trouble and has filed for Corporate Debt restructuring (CDR) in July 2013," Wikipedia says.
Nomura had kept its rating and valuation (target price) on Lanco 'suspended' as it says the company is in the process of restructuring the debt on its standalone balance sheet, by way of reference to the CDR Cell.
"Group net debt-to-equity, including working capital loans of power SPVs and Griffin Coal acquisition debt, stood at12.7x as of December 2013 compared with 10.7x as of September 2013. Receivables from state discoms stood at Rs2,770 crore as of December 2013 compared with Rs2,940 crore as on September 2013, as impasse on tariff-related issues continued; the decline in receivables was largely on the back of recovery of Rs160 crore from Uttar Pradesh," Nomura said.
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