Cri­sis-hit IL&FS faces im­pair­ments of 15,000 crore in loans, eq­uity

Re­cov­ery could be con­strained by the qual­ity of col­lat­eral at group firms, says a re­port by Sin­ga­pore’s REDD In­tel­li­gence

Mint Asia ST - - News - BSY HAYAN G HOSH

ri­sis-hit In­fra­struc­ture Leas­ing & Fi­nan­cial Ser­vices (IL&FS) may re­quire im­pair­ments of around ₹ 15,000 crore in loans and eq­uity in its sub­sidiaries, said a re­port by Sin­ga­pore-based REDD In­tel­li­gence.

Ac­cord­ing to the re­port, IL&FS re­ported con­sol­i­dated debt of around ₹ 91,080 crore.

“Given the sec­ond-lien na­ture of the se­cured loans at IL&FS par­ent and IL&FS Trans­porta­tion Net­works Ltd (ITNL) par­ent, re­cov­ery could be con­strained by the qual­ity of the col­lat­eral (eq­uity pledges from oper­at­ing sub­sidiaries),” the re­port said.

REDD In­tel­li­gence, a Sin­ga­pore-based firm that spe­cial­izes in stressed debt, said the ob­vi­ous stress is in the around ₹ 4,220 crore eq­uity in­vested in en­ergy sub­sidiary IL&FS Tamil Nadu and around ₹ 1,700 crore loan to the en­ergy sub­sidiary and re­lated party of that project.

“It ran into dif­fi­cul­ties af­ter it set up a 1,200 megawatts (MW) coal-based power plant and was only able to se­cure a power pur­chase agree­ment for only 540MW. It has been filed into in­sol­vency at the Na­tional Com­pany Law Tri­bunal (NCLT),” the re­port said, adding that since IL&FS has 175 sub­sidiaries and 66 joint ven­tures/as­so­ciates, there is not enough in­for­ma­tion dis­closed to un­der­stand the vi­a­bil­ity of each project.

The re­port es­ti­mated that around ₹ 5,500


crore in ex­po­sure to as­so­ciates like Hill Coun­try Prop­er­ties Ltd, Dighi Port Ltd (cur­rently in in­sol­vency) and IL&FS Engi­neer­ing and Con­struc­tion Co. Ltd (also filed into in­sol­vency) to have lim­ited re­cov­er­ies and there­fore re­quire im­pair­ment.

“We es­ti­mate that an around ₹ 1,200-1,400 crore write-off is re­quired at its large sub­sidiary Chenani Nashri Tun­nel­way Ltd,” it said.

REDD es­ti­mated a write-off may be re­quired for IL&FS’S around ₹ 1,800-crore ex­po­sure to sub­sidiary IL&FS Mar­itime In­fra­struc­ture Co. Ltd, which has high re­lated party trans­ac­tions and re­ported a loss of around ₹ 300 crore in FY18.

An email sent to the com­pany re­mained unan­swered till the time of go­ing to press.

Fol­low­ing a spate of de­faults by IL&FS and sub­se­quent down­grades by credit rat­ing agen­cies, the Union gov­ern­ment su­per­seded the com­pany’s board un­der Sec­tion 241(2) of the New Com­pa­nies Act, 2013.

This sec­tion en­ables su­per­s­es­sion of a com­pany’s board to pre­vent it from fur­ther mis­man­age­ment and to pro­tect pub­lic in­ter­est.

The gov­ern­ment had also said that the con­sol­i­dated fi­nan­cial state­ment of IL&FS hold­ing com­pany and its arms and joint ven­tures “pro­jected a pic­ture through highly ex­ag­ger­ated de­pic­tion of non-cur­rent as­sets in the form of in­tan­gi­ble as­sets amount­ing to over around ₹ 20,000 crore”.

The new board com­prises six di­rec­tors— Uday Ko­tak, man­ag­ing direc­tor of Ko­tak Mahin­dra Bank, G.N. Ba­j­pai, former chair­man of the Se­cu­ri­ties and Ex­change Board of In­dia, G.C. Chaturvedi, chair­man of ICICI Bank Ltd, and former bureau­crats Vi­neet Nay­yar (also a former vice-chair­man of Tech Mahin­dra), Malini Shankar and Nand Kishore.

Af­ter its first meet­ing on 4 Oc­to­ber, Uday Ko­tak, who is the chair­man of the board, de­scribed IL&FS as an ex­tremely com­plex cor­po­rate with 348 en­ti­ties that are part of the group—far higher than the ini­tial es­ti­mate of 169 sub­sidiaries.

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