IL&FS board moves to tighten the belt
May wield axe on personnel spend; sets up full audit
Kick-starting the process of pulling IL&FS out of financial crisis, its newly appointed seven-member board, headed by Uday Kotak, on Friday decided to initiate austerity measures relating to personnel and operating expenses. The board also initiated a full audit of the standalone and consolidated accounts of the company as on September 30, 2018.
The board, which met for the second time, has named directors from among the present board as nominee directors on IL&FS’ eight subsidiaries, including IL&FS Financial Services, IL&FS Transportation Networks, and IL&FS Engineering & Construction Company.
In the wake of defaults by IL&FS and its arms on some of their debt obligations and the ripple effect on the financial system, the board of IL&FS was superseded on October 1 by the Mumbai special bench of the National Company Law Tribunal on a petition by the Ministry of Corporate Affairs.
The full audit assumes significance in the backdrop of the new board being made aware of 348 entities as being part of the group, significantly higher than the 169 disclosed.
In FY2018, the consolidated employee benefit expenses of IL&FS (and its numerous arms) rose 8 per cent year-onyear (YoY) to ₹1,238 crore. These expenses were 6 per cent of the total expenses (consolidated). In FY2018, the total expenses (consolidated) of IL&FS were ₹20,908 crore.
Within the consolidated expenses, other operating and administrative expenses saw a 37 per cent year-on-year increase to ₹4,090 crore.
The austerity measures could focus on expenses relating to ‘programme implementation’, which jumped 45 per cent YoY, ‘toll management fees, which soared from ₹4.3 crore in FY17 to ₹94 crore in FY18, and the 38 per cent YoY rise in ‘provision for overlay expenses’. Further, cutbacks are expected in rent (₹163 crore), travel and conveyance (₹99 crore), communication (₹27 crore) and miscellaneous expenses (₹513 crore).
The board, which deliberated on the roadmap, approved the formation of a core operating committee under Vice-Chairman & Managing Director Vineet Nayyar.