Karuturi assets on sale as two banks seek to recover Sh1.6 billion

Inside one of the Karuturi farm greenhouses in 2014 (Photo: GRAIN)
Business Daily | 25 November 2022

Karuturi assets on sale as two banks seek to recover Sh1.6 billion

Two lenders have placed on sale Karuturi Limited’s assets to recover the Sh1.6 billion debt they are owed by the once largest Naivasha-based flower farm.

Mumbai-based ICICI bank and Stanbic bank says interested buyers of the assets that include a 70-hectare piece of land with multiple titles must deposit 25 per cent of the bid price upfront to bid for the assets.

The lenders say unsuccessful bidders will get back their refund within seven days after the completion of the selection exercise.

“We are offering for sale a prime farm located on Moi South Lake road, Naivasha, Kenya. The farm has been previously used to cultivate the cut flower,” said the banks in the notice placed by one of the receivers of the assets.

“Preference for the sale of the entire facility as one lot. The vendor is open to parties showing interest in individual parcels of land and or moveable assets,” says the notice.

Some of the assets up for grabs in the sale that requires prospective bidders to express interest by December 15, 2022, include greenhouses sitting on 26 hectares of land, grading halls as well as social amenities.

Others are well-laid-out irrigation systems, IT equipment, furniture, a tractor and motorcycles.

The feud arose when ICICI extended a foreign currency term loan of Sh3.6 billion to Karuturi in two tranches between 2010 and 2011, alongside a working capital demand loan of $11 million (Sh990 million).

The flower firm however claimed it only owes Sh885 million of the loan, and that the bank’s demand encompasses the working capital loan, which was secured using property in Ethiopia.

The land whose value stands to the tune of Sh8 billion was used to secure a loan between 2010 and 2011.

The assets are up on sale barely a year after Stanbic Bank received the nod from the court to proceed with a piecemeal auction of assets of Karuturi Limited to recover the debt.

Justice David Majanja allowed the sale to proceed after declining the firm’s request to direct Stanbic bank and receiver managers to undertake the sale of Karuturi’s six land parcels together with other assets as a whole by way of a private treaty.

The judge allowed the bank to sell the farm’s suit properties piecemeal saying if there will be any damage, the same can be remedied through compensation.

The parcels of land up for sale are registered in the name of Rhea Holdings Limited and Surya Holdings Limited.

The suit properties were used to secure loans amounting to $6,590,000 (Sh805,957,000) advanced by the bank to Karuturi.

Due to default, Karuturi was placed under receivership on February 10, 2014. To forestall the receivership and sale of the suit assets, Karuturi filed a suit in court and applied for an injunction restraining the auction.

However, it eventually lost the battle last year after the Court of Appeal dismissed the appeal against the refusal by High Court to grant an injunction on the intended sale.

The Supreme Court also rejected Karuturi’s bid to pursue the matter further.

An audit of the receivership done to establish any further amount due and owing by Karuturi established that Karuturi owed the bank a sum of $4,028,194 (Sh492,648,126) and Sh2,706,994 together with contractual interest as contained in the loan agreement.

The court had also ordered Rhea and Surya to pay the bank $ 6,337,120 (Sh775, 346,632) being the sums outstanding to creditors and $6,734,083 (Sh823,915,055) being monies advanced by the bank post the receivership period up to December 31, 2016.

They were also ordered to pay $978,849 (Sh119,762,175) expenses incurred by the bank in preserving the assets of the company from January 1, 2017, to July 31, 2017.

But jointly with the flower farm and the director of the Karuturi Group, Sai Ramakrishna Karuturi, they returned to court after the bank advertised for the sale of the assets in July 2021. The director is also the major shareholder of the group.
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