IL&FS Mo­ra­to­rium Hits Group Com­pa­nies

Com­pa­nies may dry up; Lenders could face dif­fi­culty in re­cov­er­ing their dues

The Economic Times - - Disruption: Startups & Tech - [email protected] timegroup.com

Mum­bai: The blan­ket mo­ra­to­rium granted to In­fra­struc­ture Leas­ing & Fi­nan­cial Ser­vices (IL&FS) on re­pay­ment of loans is chok­ing the op­er­a­tions of even those com­pa­nies of the group that are gen­er­at­ing suf­fi­cient cash flows to pay off their dues, said two peo­ple in the know of the de­vel­op­ment.

This runs the risk of lenders shut­ting the tap for those com­pa­nies as well and lim­it­ing the abil­ity of lenders to re­cover the loans.

Banks’ ex­po­sure in the to­tal debt of the IL&FS group is at 60%, ₹ 50,000 crore out of ₹ 91,000 crore.

The Na­tional Com­pany Law Ap­pel­late Tri­bunal (NCLAT) has ex­tended a mo­ra­to­rium after giv­ing ini­tial re­lief un­til the fi­nal hear­ing. The Min­istry of Cor­po­rate Af­fairs filed an ap­pli­ca­tion with the NCLAT after the Na­tional Com­pany Law Tri­bunal re­jected the ap­pli­ca­tion for a mo­ra­to­rium in Oc­to­ber.

NCLAT will hear on Jan­uary 28 a plea by the Min­istry of Cor­po­rate Af­fairs (MCA) to im­pose a 90-day mo­ra­to­rium on re­pay­ments by IL&FS and its sub­sidiaries as the gov­ern­ment-cho­sen board, which took over on Oc­to­ber 1, seeks to re­vive the group. The court has asked IL&FS to sub­mit de­tails of its 348 sub­sidiaries. IL&FS de­clined to com­ment for this story.

“IL&FS group com­pa­nies are not pay­ing lenders even if the cash flow of the sub­sidiary is good,” said a source close to the de­vel­op­ment.

The le­gal view given to the board is that the com­pa­nies should take di­rec­tions from the court on struc­tur­ing of pay­ments tak­ing a holis­tic view and re­frain from pay­ing un­til then. On the other hand, lenders have ex­pressed con­cerns over mak­ing ex­tra pro­vi­sions for loans clas­si­fied as non-per­form­ing on ac­count of their IL&FS ex­po­sure by the last quar­ter, drag­ging earn­ings down.

The view taken by the com­pany is that the mo­ra­to­rium is for the en­tire ₹ 91,000 crore, and it can ex­er­cise the op­tion of not pay­ing to any lender. The board will seek clar­ity from the courts on how to struc­ture the pay­ments sched­ule so that there’s no dis­crep­ancy or le­gal re­course, said a per­son fa­mil­iar with the mat­ter.

The newly-con­sti­tuted board of IL&FS has or­dered cost-op­ti­mi­sa­tion mea­sures and stake sales in sub­sidiaries to gen­er­ate liq­uid­ity, and cash flow as­sess­ment for the next 12 months at each of the group’s en­ti­ties.

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