A highly publicised move by banks to sell Kingfisher House, once the headquarters of Vijay Mallya’s defunct airline, drew a blank on Thursday as potential bidders stayed away from the e-auction deterred by a relatively high valuation and possible reluctance to associate with a troubled brand.
Though the auction was conducted by bankers to Kingfisher Airlines, concerns over possible litigation subsequently could also have put off suitors, experts said. They said limited pre-auction time might have cut out large foreign buyers, who typically conduct longer due diligence.
The base price – bids could only be made above it – for the over 2,400-sq metre house was set at Rs 150 crore, which when combined with the cost of reconstruction would value the property at over Rs 30,000 a square feet. The going rate in the area is Rs 17,000-20,000 a square feet. The bid increment amount was Rs 5 lakh.
“The e-auction of Kingfisher House failed to get any bidders. I think the higher reserve price was one of the reasons,” said an official involved in the process. “There will now have to be an alternative process, although nothing is finalised.”
The development came on a day reports emerged that IPL franchise Royal Challengers Bangalore had written to the Board of Control for Cricket in India intimating it about Mallya’s resignation from the post of director of Royal Challengers Sports Pvt Ltd.
Mallya left the country on March 2 with unpaid bank loans of about Rs 7,200 crore and tweeted from an unknown location later saying he was not on the run and would abide by the law. His departure came days before a consortium of 17 banks led by SBI approached the Supreme Court to restrain him from leaving India. Finance minister Arun Jaitley reiterated at a media event on Thursday that the banks would recover every penny due.
“...his (Mallya’s) facts are very clear. Every government agency, whether its taxation department or investigative agency, wherever he has violated law, is going to take strong action. As far as banks are concerned, they are going to recover every penny of the rupee that they can from him,” Jaitley said.
The e-auction conducted by SBI Caps Trustee on behalf of the bank consortium was prominently advertised in newspapers and had caught public attention as it was widely seen as the start of a banks-initiated corrective action against Mallya’s loan defaults.
SBI Caps did not comment on the auction process.
“Such kind of deals have limited appetite as they are done by a select group of foreign buyers who would look at a return of more than 10% and a grade A tenant for such a property. But they need time for all of this, which wasn’t there,” said Amit Bhagat, CEO, ASK Property Investment Advisors.
Located near the domestic airport in Mumbai, Kingfisher House was put on the block on the online property auction platform, AuctionTiger, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The banking consortium had taken possession of the property in February 2015.
Pankaj Kapoor, managing director of consultancy firm Liases Foras, said the property was priced 40% higher than market rates. “Real estate is currently a distressed market and you can’t have such exuberant pricing,” Kapoor said.
SBI and banks have been caught in more than 20 legal disputes related to Kingfisher Airlines, with more than 500 hearings so far. The banking consortium had already sold shares of the defunct airlines for Rs 550 crore in 2013.