‘Green’ entities are those which can pay all their obligations while ’ambers’ are those that can meet their obligations only partially. “Reds” are those that cannot meet any of their obligations.
More than half of the `94,000-crore debt of the crisis-ridden IL&FS could be recovered, the government reckons, even as the bidding process for the group’s subsidiaries with outstanding loans of around `30,000 crore is expected to end this month.
With the government’s backing, the IL&FS board, headed by Uday Kotak, has already been able to turn `18,000 crore of the debt-laden arms of IL&FS into the green category of companies that continues to meet the payment obligations, sources told FE.
“The bidding process for IL&FS subsidiaries, involving debt of around `30,000 crore, will end this month by July 31. The future course of action will only be decided after assessing the bidding response,” one of the sources said.
They said in case the response from the bidding is poor or not as per expectations, then the ‘Swiss Challenge’ route to bid out certain specialised arms of IL&FS will be considered – especially those in the education and waste-to-energy businesses.
Under a Swiss Challenge, an interested party initiates a proposal for a contract or the bid for a project. The government then puts the project details in public and invites proposals from others as well. On the receipt of these bids, the original contractor gets an opportunity to match the best bid and if it fails, the contract or project or entity goes to the highest bidder.
In 2016, the RBI included Swiss Challenge method of recovery under guidelines on sale of stressed assets by banks. It said to bring down the vintage of non-performing assets (NPAs) sold by banks as well as to enable faster debt aggregation by the Securitisation Companies (SCs)/ Reconstruction Companies (RCs), banks will put in place board-approved policy to adopt the Swiss Challenge method for the sale of stressed assets.
Separately, a senior government official said: “Swiss Challenge allows a seller to introduce features of an open auction and a closed tender to discover the best price. In some bankruptcy cases, the banks faced a situation where a bidder offered a better deal than the winning one, but it came after the bidding process closed. So, this method can help banks get better deals while auctioning stressed assets”.
Of the 302 IL&FS group entities, 133 were incorporated outside India and as such are outside the territorial jurisdiction. The remaining 169 companies, incorporated domestically, have been divided into three categories on the basis of their debt-servicing ability. ‘Green’ entities are those which can pay all their obligations while ’ambers’ are those that can meet their obligations only partially. “Reds” are those that cannot meet any of their obligations.
In a submission before the NCLAT on February 21, the IL&FS Board had submitted the classification of 151 companies – 50 were in the green, 13 amber, 80 red and eight were in different stages of resolution. The remaining 18 were yet to be classified.