This Article is From Jul 21, 2015

GVK Coal Under Debt Burden of $885 Million

Hyderabad: GVK Coal Developers, which owns mines in Australia, is burdened with $885 million of debt, according to GVK group's annual report.

GVK Coal, a step down subsidiary of GVK group, in 2011 acquired a 79 per cent stake in the Alpha Coal and Alpha West Coal projects and 100 per cent stake in the Kevin's Corner Project, Queensland from Hancock Coal Pty Ltd.

The group has made investments aggregating to Rs 333 crore by way of advances, subscription of shares and share application money and provided guarantees and commitments aggregating to Rs 6,534.5 crore to lenders of GVK Coal as on March 31, the annual report stated.

"GVK Coal is currently under development phase and is making losses and its current liabilities exceed current assets by $885 million (Rs 5,539 crore) based on unaudited financial statements for the year ended June 30, 2014," GVK said in the report.

The company attributed falling coal prices since the acquisition of stake in Australian coal mines, to the net worth erosion.

"Management believes that GVK Coal would be able to establish profitable operations, meet its obligations, and its current liabilities being in excess of current assets is temporary situation and will not impact ability of the company to continue in operation in foreseeable future and accordingly will not have any material adverse impact upon operations and cash flows of the company, the company hoped.

GVK had earlier said it acquired the Australian mines for $1.26 billion to be paid in a phased manner to the Hancock Group with $500 million payable initially while the balance amounts, $200 million will be paid one year from closing and $560 million will be paid on financial close for the project (anticipated to be in 2012) but in any event, no later than three years from closing.

"GVK coal is also in discussion with non-controlling shareholders realign the option exercise dates and additional funding from potential investors," the report said. 

The Alpha Coal with billions of tonnes of coal reserves has received most of the clearances from the Australian federal government and GVK has signed a non-binding agreement with Aurizon for Rail and Port infrastructure development.