The board of directors of IL&FS will seek the reappointment of Arun Saha, joint MD and CEO of the group, for a further five years, till March 26, 2023, at the company’s forthcoming annual general meeting (AGM). According to the notice issued to shareholders ahead of the AGM on September 29, the board will seek shareholders’ approval for Saha’s reappointment on his existing terms and conditions.
The board also says Saha is in the process of grooming the next line of leadership at IL&FS as part of a succession planning programme to ensure a smooth transition.
Saha is also member of various committees within IL&FS, including the Risk Management Committee which failed to conduct a single meeting last year, according to the company’s annual report.
Further, the IL&FS board believes that in view of the “expanse of IL&FS Group…the quantum of systematic monitoring and implementation of various policies and procedures” has become critical and will need continuity of leadership to achieve the desired results.
IL&FS, on September 6, said the Reserve Bank of India (RBI) had barred the company from accessing the commercial paper market till February 28, 2019.
Besides, the central bank also warned IL&FS Financial Services to reduce its loan exposure to group companies, since it had breached the regulatory limits. RBI’s sanction came after the company could not repay commercial papers due on August 28 and August 30, which it settled in full on August 31. According to the Reserve Bank Commercial Paper Directions, 2017, an issuer, who has defaulted on a CP, cannot access the CP market for six months from the date of the repayment of the defaulted obligation.
In a stock exchange notice on September 15, IL&FS again said it has received notices for delays and defaults in servicing some inter-corporate deposits as well as commercial papers, without giving any details. The defaults resulted in a downgrade in ratings, IL&FS added. According to sources, commercial paper (CP) due on September 18 were also not serviced. A senior company official did not respond to a query seeking comment.
According to a report by Nomura India, IL&FS has a consolidated debt of `91,000, over 50% of which is owed mostly to state-run banks.
At the AGM, the board will also seek shareholders’ approval to increase the authorised share capital from Rs 1,500 crore to Rs 1,600 crore and the paid up equity shares from 40 crore shares to 50 crore shares. In addition, the board proposes to raise the borrowing limits from Rs 25,000 crore to Rs 35,000 crore as well as approve the audited consolidated financial statement for 2017-18.
Its shareholders — Life Insurance Corporation of India, State Bank of India, Central Bank of India, Orix Corporation of Japan, HDFC and Abu Dhabi Investment Authority — are believed to have asked IL&FS for a turnaround plan as well as its plans to monetise assets to raise funds, before they decide to extend further support to the cash-strapped firm.