GVK Power and Infrastructure Ltd (GVKPIL) is set to undergo insolvency proceedings due to unpaid loans, as ruled by a corporate insolvency court. The Hyderabad bench of the National Company Law Tribunal (NCLT) issued this order following a petition from a lenders’ group led by ICICI Bank Ltd, as reported by GVKPIL in a stock exchange filing.

The loan in question was initially taken by GVK Coal Developers (Singapore) Pte Ltd over a decade ago, with GVKPIL serving as the guarantor.

On Tuesday, GVK Power’s shares hit the 5% lower circuit limit at Rs 9.64, reflecting a 14.61% decline over the past month. Both the BSE and NSE have placed GVK Power securities under the long-term Additional Surveillance Measure (ASM) framework, which is implemented to alert investors about significant stock price volatility.

On July 12, the NCLT bench issued an order, disclosed publicly on Monday, in response to a petition filed by ICICI Bank in 2022. The tribunal appointed Satish Kumar Gupta as an interim resolution professional to oversee GVK Power and Infrastructure Ltd (GVKPIL) during the insolvency proceedings.

According to the NCLT order, GVKPIL has acknowledged its financial obligations and confirmed its role as guarantor in its annual reports for the fiscal years 2018-19, 2019-20, and 2020-21. As of June 13, 2022, the outstanding debt totaled USD 1.84 billion, comprising USD 1.13 billion in principal, USD 731.57 million in interest, and an agency fee of USD 144,000.

Senior counsel K Vivek Reddy, representing ICICI Bank, cited a London court judgment from October of the previous year to support the insolvency proceedings against GVKPIL. He noted that the company’s failure to address the initial default dating back to February 2017, coupled with the London court’s confirmation of liability, necessitated the initiation of bankruptcy proceedings.

In September 2011, ICICI Bank’s branches in Dubai, Bahrain, and Singapore, along with Bank of Baroda in Ras Al Khaimah, Bank of India in London and Singapore, and Canara Bank in London, collectively sanctioned a term loan facility of Rs 8,356 crore and a letter of credit worth Rs 292 crore to GVK Coal for the acquisition of coal mines in Australia.

Additional term loans amounting to Rs 367 crore were sanctioned by other banks in March 2014, which were later increased to Rs 2,089 crore.

In March 2016, ICICI Bank discovered that GVK Group planned to sell its stake in Bangalore International Airport Ltd without obtaining lender consent, which violated the facility agreements.

As a result, the banks filed an injunction application in a London court in April 2016, leading GVK to agree not to proceed with the sale of its Bengaluru airport stake without lender approval.

Due to GVK’s continued default on loan payments, the lender banks filed claims amounting to Rs 5,915 crore under facility agreement-I and Rs 1,236 crore under facility agreement-II before the London court.

In November 2020, ICICI Bank invoked its corporate guarantee from GVK Power and Infrastructure Ltd (GVKPIL), demanding payment of Rs 5,000 crore covering principal and interest.

GVKPIL acknowledged its inability to make the payments immediately but indicated a commitment to settle after negotiating with the Adani Group, urging ICICI Bank to hold off on taking action, as per the order.

Despite these discussions, ICICI Bank proceeded to file with the NCLT in 2022 to initiate insolvency proceedings against GVKPIL. On July 12, the NCLT determined that as of June 13, 2022, GVKPIL owed a total of Rs 15,576 crore, comprising Rs 9,463 crore in principal, Rs 6,113 crore in interest, and Rs 1.23 crore in agency fees.