MUMBAI, NOV 15: Delhi-based real estate developers Dalmias, who are in the midst of a takeover battle with Bombay Boys Sheths and the Mahindras for control of realty firm Gesco Corporation, have put HDFC chairman Deepak Parekh in a highly embarrassing situation with a request for a line of credit similar to the one that he extended to the Sheths and loss-making Mahindra Realty. The Dalmia request comes in the wake of reports that Deepak Parekh has closed ranks with Mumbai-based industrialists and sanctioned an irrevocable line of credit to the Mahindras (reportedly for Rs 30 crore with a provision to increase in future) to finance their competitive bid against Dalmia's offer to acquire 45 per cent of Gesco Corp shares.The line of credit sanctioned accounts for almost 86 per cent of the counter bid value of Rs 34.70 crore. Parekh is considered close to the Mahindras and the Sheths. Hence, the line of credit was immediately issued. HDFC is unlikely to extend any loan to the Dalmias. But as AH Dalmia, the promoter of Renaissance Estates, says, HDFC would not be justified in refusing to finance him on the grounds that the same institution cannot fund competitors. HDFC is a "professional financier" and it cannot be tied to one competitor against another.``That is to say, it cannot say, for example, because it has financed theReliance refinery project, it cannot finance the competing refinery project of Essar. If HDFC were to do that in our case, that is, cite its decision to finance the competitive bid of M&M and associates as disenabling them to finance our bid it would be unprofessional. Besides such an approach would make the HDFC a party to the bid, even a party acting in concert with the counter bidders, is a party cooperating in the acquisition. We are sure this is not the intention or the position of the HDFC,'' Dalmia says.HDFC is owned 26 per cent by UK-based Standard Life and rest by Indian institutions and retail shareholders. Parekh took over as the chairman of the company from his uncle H T Parekh who founded HDFC. Parekh holds only a negligible stake in the company. ``The sheer extent of financing reported (for Gesco) makes one feel that the HDFC (read Parekh) is more than a financier, it is almost a party to the counter bid. Now that the HDFC has appraised the bid for Gesco Corp shares at Rs 36 per share as a worthy risk for HDFC to finance, we intend seeking finance from HDFC for revising our bid to a higher price for Gesco Corp shares. We are willing to accept the same terms and conditions as the HDFC has subjected Mahindra and associates,'' Dalmia said in a communication to Parekh. ``It is obvious that the decision of HDFC to finance is based on its assessment and appraisal that the acquisition of Gesco Corp shares is a worthy project and an acceptable credit tisk. It is also obvious that the credit sanctioned by HDFC is not a personal or untied credit to MRIDL; it is for the project for acquisition of shares of Gesco Corp. That is, the basis of the credit appraisal is the worth of Gesco Corp as an undertaking,'' he said. Dalmia also put across the point that it cannot be a decision specifically to finance the Mahindras. What makes Dalmia's case stronger is that Mahindra Realty has made massive losses for the fiscal ended March 2000 and has its balance sheet qualified by its auditors. A substantial shareholding of HDFC is held by FIs and it is otherwise too, a highly state-patronised institution, and so to that extent it has a public character and therefore it cannot claim to behave as if it is an unbounded private financier.``That is besides the fact that as an FI in which the public is substantially interested, the ordinary principles of corporate governance would not allow HDFC to finance arbitrarily - that is not projects but persons. Therefore it must be presumed that HDFC has appraised it as a project to acquire GESCO shares and a fit project to finance,'' the letter says. ``We trust the HDFC decision to finance the competitive bid of Mahindra and associates is not an act intended to save the GESCO promoters, but as said earlier it is merely a project finance for acquisition of shares of GESCO as an economically viable business proposition in itself and is not a finance for Mahindra and its associates,'' Dalmia says.
