Resolving IL&FS crisis: Single solution for entire group debt not possible, Uday-Kotak led board tells NCLT

By: | Updated: December 4, 2018 2:44 PM

The board has now appointed Arpwood Capital Private and JM Financial Services as financial and transaction advisors (FTAs) to look into the possibility of vertical and asset-level resolution options.

IL&FS, Sanjay Nirupam, NBFC, Kotak Mahindra Bank, NHAI, Kingfisher Airlines, Shares of NBFCUday Kotak-led board of infrastructure finance company was superseded by the government in October.

The billionaire banker Uday Kotak-led board of Infrastructure Leasing and Financial Services (IL&FS) has informed the National Company Law Tribunal (NCLT) that it is planning to focus on vertical as well as asset-level resolution as finding a solution for the group’s crisis and debt of about Rs 91,000 crore is not possible.

The group-level resolution would involve significant capital infusion from credible as well as financially strong investors, which is not feasible right now, the board said its latest status report to the NCLT. “Based on an outreach conducted by the FTA, the initial assessment seems to indicate that currently, the group-level resolution option is unlikely to materialise,” it noted in the report.

Now, the board is left with hiving off the business and selling entire business verticals to willing buyers. In case it does not fructifies, it will take the route of asset-level resolution, which would include asset-by-asset solution via various methods such as significant capital infusion or asset monetisation to cut debt.

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The board has now appointed Arpwood Capital Private and JM Financial Services as financial and transaction advisor (FTA) to look into the possibility of vertical and asset-level resolution options.

The board has already put two of its arms – IL&FS Securities (ISSL) and ISSL Settlement and Transaction Services (ISTSL) – on the block, apart from a few renewal energy assets. It also said in the report that the group expects to save about Rs 100 crore per annum through rationalisation of salary and separation of superannuated consultants. Also, it plans to soon begin the process to sell holdings in IL&FS Education, ONGC Tripura Power Company, IL&FS Technologies and IL&FS Paradip Refinery Water.

Uday Kotak-led board of infrastructure finance company was superseded by the government in October after it defaulted on payment dues triggering liquidity concerns. In the recent past, the board adopted several measures such as termination of guest houses leased by various group entities, manpower rationalisation and closure of the office in various locations, so as to cut cost.

The government-appointed board had submitted a blueprint of its revival plan for the group before NCLT last month. In the report,  it said that large part of the group operated as a single enterprise with “no boundaries of legal entities and separate management”, which ultimately led to the contagion impact on its creditors.

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