IL&FS Transportation Networks (ITNL), a listed subsidiary of Infrastructure Leasing & Financial Services (IL&FS), on Tuesday said it defaulted on Rs 17.9 crore of debt. The repayments were due in six separate repayments on October 29 and 30; the company cited insufficient funds.
On Wednesday, the National Company Law Tribunal’s Mumbai bench is set to hear from the holding company IL&FS’ Uday Kotak-led board on the revival plan for the troubled infrastructure financier.
The NCLT hearing comes almost a month after it approved the government’s move to supersede the company’s then board and replace them with members from its own list of nominees, a move similar to events in the case of fraud-hit Satyam Computer Services in 2009.
The newly-constituted board most recently met over the weekend to discuss the potential resolution plan that would be presented to the NCLT on Wednesday. The board has approved the appointment of Alvarez & Marsal to prepare a detailed restructuring plan, and Arpwood and JM Financial as financial advisors. As per reports, a revival plan could mean a potential sale of core and non-core assets and could include raising cash through sale of road assets in order to fulfill repayment obligations.
Meanwhile, government sources have also indicated to one publication plans under consideration included an outright sale of IL&FS to an interested, financially-strong investor, and alternately injection of liquidity at group level.
IL&FS’ troubles came to light after an announcement in September that it had been unable to service its obligations on some commercial paper and inter-corporate deposits that came soon after its founder Ravi Parthasarathy quit, citing health reasons. To be sure, the group hasn’t stopped missing re-payments, even after the government-appointed board took over operations, though it has managed to get relief from the appellate tribunal on bankruptcy proceedings until November 13.
However, most banks have stated that their exposure to the company remains standard on their books.
IL&FS has an accumulated debt of over `91,000 crore and the banking sector’s exposure to the company stands at of around Rs 53,000 crore, or 16% of all lending to non-banking finance companies.
The announcement on defaults by the Il&FS group, a complex corporate structure with 348 direct subsidiaries, associates and joint ventures, caused panic among participants across Indian money markets, causing a sharp sell-off in stock markets, especially on non-banking financial institutions and housing finance companies, while causing a liquidity rise owing to pressure on corporate bond yields.
The markets took little assurance from the fact that the infrastructure lender’s largest investors include the country’s largest life insurer Life Insurance Corporation, State Bank of India and HDFC, along with Japan’s Orix Corp.
Following an emergency hearing requested by the government, on October 1, the tribunal, presided over by MK Shrawat and Ravi Kumar Duraisamy, okayed the names of six directors — Uday Kotak, managing director of Kotak Mahindra Bank; GN Bajpai, former chairman of the Securities and Exchange Board of India; GC Chaturvedi, chairman of ICICI Bank; former bureaucrats Vineet Nayyar (also a former vice-chairman of Tech Mahindra), Malini Shankar and Nand Kishore, for the newly-formed board, from among a list of nominees presented by the ministry of corporate affairs.