IL&FS mess is deeper, darker; needs `100 crore/month just to stay afloat

Financial Chronicle - - FRONT PAGE - FC BUREAU

THE new board of IL&FS has in­formed the govern­ment that the in­fra fi­nancier needs Rs 100 crore a month just to stay afloat. The board at the same time is work­ing on over­haul­ing the com­pany ex­penses, which in­cludes big cuts in the wage bill and pos­si­ble lay­offs, of­fi­cial sources said.

“For the group to be afloat, we need to ful­fil work­ing cap­i­tal needs as well as the con­trac­tual and re­pay­ment obli­ga­tions. Rs 100 crore per month (is re­quired) just to stay afloat, ex­clud­ing re­pay­ment,” the of­fi­cial said.

Ahead of the sec­ond board meet­ing on Oc­to­ber 12, IL&FS board chair­man Uday Ko­tak met In­jeti Srini­vas, sec­re­tary in the min­istry of cor­po­rate af­fairs (MCA), on Wed­nes­day to give him a first-hand assess­ment of IL&FS and to ap­prise the govern­ment of the steps be­ing taken.

While the first pri­or­ity is to re­main afloat, cost ra­tio­nal­i­sa­tion could also hap­pen, which may im­ply job losses. “For ex­pen­di­ture cuts, the govern­ment will have to take tough de­ci­sions,” the of­fi­cial said, hint­ing at pos­si­ble lay­offs.

“WE are con­sult­ing the govern­ment and mak­ing progress on IL&FS,” Ko­tak said. The Se­ri­ous Fraud In­ves­ti­ga­tion Of­fice (SFIO) is also in­ves­ti­gat­ing the com­pany’s busi­ness af­ter se­ri­ous com­plaints on some of its com­pa­nies sur­faced. While the govern­ment has called this a case of ‘mis­rep­re­sen­ta­tion of facts,’ an of­fi­cial said ‘a fraud can­not be ruled out.’

The board will hon­our all con­trac­tual obli­ga­tions in crit­i­cal projects and IL&FS has reached out to all cus­tomers and cred­i­tors like NHAI, and the set­tle­ment with NHAI funds may act as a tem­plate for set­tle­ment for other dues, said the of­fi­cial.

With re­gard to re­pay­ments, there could, how­ever, be a ‘tem­po­rary re­prieve,’ the of­fi­cial said, adding that the board will also have to hon­our its con­trac­tual com­mit­ments in crit­i­cal projects, in­clud­ing that of Na­tional High­way Au­thor­ity of In­dia (NHAI).

Fraud can be as­cer­tained af­ter the SFIO sub­mits its in­ves­ti­ga­tion re­port to the govern­ment in a month’s time, he added.

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