This is the Government’s second attempt at disinvesting its stake in the airline after the previous move in 2018 ended up without a bid.LAXMI PRASAD PALAYPU, Chairman of US-based Interups Inc — who has made a series of acquisition bids through the NCLT this year and recently submitted an Expression of Interest for Air India disinvestment — says he plans to invest around $9 billion in the Indian aviation sector. A scrutiny of the deals the company claims to be ‘pursuing’ in India, however, shows a patchy, if not a poor, record.
Information accessed from the Registrar of Companies shows that Palaypu has been a director in three companies. Two of these, Lakhi Investment Management Services and ISBN Securities Pvt Ltd, have already been struck off.
The third, ISBN (India) Pvt Limited is still ‘active’, but assets put under charge for Rs 1.2 crore way back in 2010, continue to remain so till date, as per RoC records. When asked about this, Palaypu told The Indian Express, “It is something that came to our notice recently… My wife was the CEO and she signed the documents. She is planning to come to India and we are planning to have a settlement arrangement with the bankers and close the case.”
In a regulatory filing with the SEC on August 7, 2020, Interups Inc had said it was ‘pursuing’ nine deals in India (including acquisition of Air India) during the 12-month period ending May 2021. There is no material investment the company has concluded so far in India and some of the deals it claims to be pursuing have fallen through.
As on date, according to Palaypu, Interups, a shell company he acquired in 2016, manages retirement accounts of more than 27,000 clients in the US, mostly comprising NRIs. The company, according to Bloomberg, has a market capitalisation of $27.6 million (around Rs 200 crore) as of Wednesday.
A Chartered Accountant, he worked in various audit firms in Hyderabad for almost a decade, between 1986 and 1995, his LinkedIn profile shows. He moved to the US in 1997 and sold insurance products at Prudential Financial. In 2002, he launched his own company IBSN Inc and by 2007, he claims to have filed returns for 55 per cent of the total migrant Indian software professional population in the US.
Of the nine deals Interups claims to be pursuing in India, one involves acquiring 100 per cent stake in Asian Color Coated Ispat Ltd (ACCIL). However, in October 2019, NCLT approved the resolution plan submitted by JSW Steel, thereby practically closing this chapter for Interups.
A source close to the resolution process of ACCIL claimed Interups did not seem to be serious. “It submitted a bid well after the due date and then raised concerns they were never heard,” said the source. Palaypu accepted they entered late into the bid. “We will appeal in the Supreme Court for an ACCIL bid,” he maintained.
Another acquisition the company claims to be ‘pursuing’ but has fallen through is in the real estate space. In the SEC filing, the company said that it has signed terms for acquiring two residential towers of Phoenix Kessaku project in Bengaluru for Rs 528 crore. A source close to the development said the deal with Interups had already been terminated by Phoenix Mills Ltd. “While Interups signed the term sheet with Phoenix Mills to acquire the two towers, there was no movement on the due diligence and the timelines to carry CA, insurance agent, now Air India bidder; Palaypu has little to show in closing deals the same were not met. Following this, Phoenix Mills terminated the agreement in September,” the source said.
Palaypu, however, said negotiations over prices were still on and it was more an issue about financial structure, “We have not failed on completing due diligence.… It is a structural issue. We cannot rush on things.”
Another deal that Interups has stated as ‘pursuing’ but has hit a roadblock relates to the purchase of 49 per cent equity in AirAsia India for and on behalf of its Non-Resident Indian customers. AirAsia India is a joint venture airline between Tata Sons and Malaysia’s AirAsia Bhd and operates in India. The struggling AirAsia Bhd had reportedly agreed to sell its 49 per cent holding but the deal fell through because Tata Sons refused the offer. The two partners have the first right of refusal for each other’s stake in the entity. Even as Interups claims that it is pursuing the acquisition, with Tata Group not agreeing to the same, it is unlikely the company will close the deal with even its chairman stating they have stopped pursuing it now.
Besides Air India, some other deals the company claims to be pursuing are acquisition of Hotel Claridges, 100 per cent stake in Hotel Intercontinental, Mahabalipuram and 51 per cent in Viceroy Hotels. For Hotel Claridges, Palaypu said he met the hotel’s chairman Suresh Nanda on November 22 and the deal was nearing closure.
The company is also pursuing acquisition of 100 per cent in Reliance Naval & Engineering Company Ltd and has submitted its Preliminary Expression of Interest. Besides, it has also bid to acquire Lavasa Corporation – a 10,800-acres city, which it intends to develop as an Education City. In addition to these, the company is targeting some deals in the real estate and financial services industries.
However, all these are still in the works and it remains to be seen if Interups is finally able to conclude any of these.
Globally, it claims to have invested in palm oil plantations in Malaysia (GBP 120 million), in an integrated real estate project in Malaysia ($140 million) and in a Ghana-based gold mining company. The firm has also set ambitious targets over the next three years. In an SEC filing on September 20, 2020, the firm said it expected to report revenues of $1.48 billion in the financial year ending May 2023. Additionally, over the next three years, it plans to expand its presence across the US, Europe, the Middle East, Australia, East Asia and South Africa.
According to the latest available numbers reported to the SEC, Interups had revenues of $139.99 million and net profit of $101.49 million for the period March 1, 2020 to June 15, 2020. While the financials are unaudited, Palaypu said the period was under audit and the consolidated numbers will be reported on January 4, 2021.
According to his LinkedIn profile, Palaypu worked as a chartered accountant at different audit firms in Hyderabad between 1986 and 1995. In 1997, he moved to the US and earned the Certified Public Accountant status there.