Kishore Biyani’s Debt Settlement Approved

Canara Bank-led lenders have given their approval to the one-time settlement offer proposed by Kishore Biyani for the debt owed by Bansi Mall Management Company (BMMCL), the holding company of the SOBO Central Mall formerly known as Crossroads at Haji Ali in south Mumbai. BMMCL had a debt of Rs 7.37 billion with lenders. The promoters have offered Rs 4.40 billion to settle the debt, representing a 40% reduction for the lenders.

No Bids for SOBO Central Mall During Auction

The joint lender meeting last month approved the settlement offer as there were no bids for the mall during an auction in January 2024, where the reserve price was set at Rs 4.75 billion. The initial valuation of the mall by lenders was Rs 6 billion when the loans were sanctioned, but due to its disuse, the internal valuation was marked down to Rs 4 billion.

Details of Bank Liability and Proposal Acceptance

Although the contractual liability of BMMCL is Rs 7.37 billion, the book liability of the banks holding the first charge, Canara Bank and Punjab National Bank (PNB), is Rs 2.2 billion. The additional liability of Rs 5.75 billion arises from a second charge held by United Bank of India and PNB against which the property was offered as security. Canara Bank and Kishore Biyani did not respond to queries for comment. The settlement proposal was tentatively accepted by the banks at the joint lenders’ meeting. For the settlement deal to be finalized, BMMCL, the borrower, must complete some formalities, including paying 10% upfront and the remaining amount before the third week of March.

Background of BMMCL and Current Challenges

BMMCL was incorporated in 2005 by the promoters of the Future group to develop and manage the mall. The SOBO Central Mall has a total leasable area of 148,198 sq ft and was predominantly rented out to Biyani’s group companies, including Future Consumer Enterprises, Future Retail, and Future Lifestyle. However, Future Consumer Enterprises occupied only 1% of the leasable area. During the Covid lockdown, the cessation of rental income and weak rent recoveries due to the distressed state of the Future companies renting the premises led to BMMCL defaulting on its obligations. The lack of cash flows severely impacted the company’s financials, resulting in continuous defaults.

SARFAESI Act and Crossroads’ History

The distressed financial situation prompted lenders to initiate proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. Crossroads, the first mall in the country set up by the Ashok Piramal group, faced challenges in managing customer traffic when it was launched in 1999. To address this, the management briefly restricted free entry to those with a credit card or a mobile phone. Others had to pay a Rs 60 entry fee. As retailers faced a downturn, the promoters eventually exited the mall management business. Despite the challenges faced by BMMCL and the restructuring efforts through the proposed debt settlement, it remains to be seen how the future sustenance and management of the SOBO Central Mall will progress.

Sumit Mondal Content Analyst at Square Yards
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