9 Dec 2009, 1206 hrs IST,
Hemamalini Venkatraman & V Balasubramanian,
CHENNAI: The Dubai desert storm which sent world markets into
a tizzy has far from settled. Down South, in Chennai to be specific, several
companies with substantial stakes in Dubai fear that they have to
bear the cascading effect of the Dubai crisis.
Consultants and senior bank officials ET spoke to have identified
ETA Star Group (with an exposure of close to Rs 10,000 crore
in Dubai) as one of the leading corporate houses which may
have to bear the biggest brunt of this crisis.
The extent of damage could, however, not be ascertained.
Coming Monday (December 14) will be a crucial date
as ‘Sukuk’, the Islamic bonds, get due for payment.
The quantum of damage will be determined depending
upon the realisation, a leading banker, on condition of anonymity told ET.
The ETA Star group, co-promoted by Chennai-based BS Abdur Rahman,
has receivables for various projects executed to the tune
of 800 million Dirham (around Rs 10,000 crore).
These include metro rail, Burj-Dubai project and
infrastructure development-related ones.
These bills are outstanding since July 2009, sources said.
Mr Rahman, vice-chairman of the Dubai-based group,
is also the chancellor of BS Abdur Rahman University, Chennai.
His sons are actively involved in the ETA Star Group's operations
in West Asia and India.
Several prestigious projects that the group has executed
in TN include the Chennai Citi Centre -- the most expensive
shopping mall in TN, Chepauk Stadium, Marina Lighthouse,
Valluvar Kottam, Government General Hospital, Gemini Flyover,
Kodambakkam Flyover and Raheja Towers.
The East Coast Construction, which is implementing
projects worth Rs 500 crore for the TN govt,
including the secretariat, and West Asia Maritime
are part of the ETA Star Group.
Since the group employs a large number of Tamils,
the crisis may affect the job front as well. In recent years,
the group has started investing more in India in areas like
real estate, housing, retailing and power. It had embarked
on a mega IT park in Chennai but slowed it down after
the global financial meltdown.
When contacted, ETA Star ED Abid Junaid refused to
comment. Repeated mails sent to top ETA group
officials remained unanswered.
Meanwhile, the director of another Chennai-based company —
National Asphalt Products and Construction (NAPC) —
Varun Manian said his company had been trying to re-work
its business plans over the last six months to minimise impact.
Dubai contributes around 15% to the company’s Rs 650 crore turnover.
Incidentally, RBI guidelines stipulate that all equity
investments abroad by Indian companies have to be
repatriated by dividends. So, companies that have set
up subsidiaries through the equity route would be severely
impacted.
The Chennai-headquartered company that executes
infrastructure works, specialises in earth-moving and
road development activities. "We have started shifting
our machines and equipment to Abu Dhabi.
Our customers (including Emaar) are seeking discounts
that are absolutely unviable since we operate on thin margins.
The Road and Transport Authority of Dubai have asked us
to stop work," he told ET.
NAPC expects to take a hit of 10% to 12% on its revenues this year.
Consolidated Construction Consortium (CCCL)
chairman and CEO R Sarabeswar told ET that the current
scenario has to be viewed in the context of the anticipated
ripple-effect this will create in the next three months.
Large projects are still available in Abu Dhabi.
"We have seen no direct impact," he said. In Dubai,
CCCL has executed many projects —building factories
and villas worth 20 million dirhams. It is expecting to bag
a couple of private contracts for around 35 million dirhams.
Rakindo honcho Prasad Koneru said his company, which
operates out of Dubai, has not been impacted at all.
A senior official of an infrastructure company said special
purpose vehicles have their own cash flows and hence,
companies that have been project-financed are not really
in a precarious situation.
However, another top bank official said there are cases wherein,
transactions involving other countries where Dubai is used as the
trans-shipment point, have been hit. For example, companies
shipping their products to the Middle East and North Africa
markets have been hit by the Dubai bubble.
Ashok Leyland and Hyundai have been using this logistics
hub to gain entry to high-risk countries, where they de-risk
by opting for Islamic Banking channel. Meanwhile, a few
contracting companies, routing their exports through Dubai,
are said to have taken a hit to the extent of $1 million or so.
Sources:ET
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