Former IL&FS Directors Write To Uday Kotak Extending Support In Turnaround Efforts
Former IL&FS independent directors have extended their “complete support” to new Chairman Uday Kotak.
A day after the government superseded the board of the Infrastructure Leasing and Financial Services Ltd., former independent directors of the crisis-ridden group have written to new Chairman Uday Kotak extending their “complete support” in the revival of the entity.
Five former independent directors, including former Chairman SB Mathur, in a letter, have also mentioned about IL&FS being unable to raise additional equity despite several attempts and the “asset-liability” mismatch that continued to aggravate. Other independent directors were Maruti Suzuki’s RC Bhargava, former IAS officer Michael Pinto, Jaithirth Rao and Rina Kamath.
The group of former independent directors said the government’s action is a correct one as it enables reaching out to various counter parties, including debtors and creditors of IL&FS, from a position of strength and clarity. “Despite several attempts during our tenure, IL&FS was unable to raise additional equity directly or at the level of its subsidiaries. It was also unable to complete a merger with a strategic party which failed to consummate in the final stretch,” the letter said.
With its mounting counter-party receivables and the need to continue with existing projects and the absence of long-term financial support in the markets, the asset-liability mismatch continued to aggravate almost inexorably... we believe that this structural conundrum needs to addressed for all infrastructure financing in the country,Former IL&FS Independent Directors’ Letter To Uday Kotak
The government on Monday said that having a new board was the necessary first step towards restoring the confidence of the financial market in the IL&FS Group. Defaults by some IL&FS group entities have triggered concerns of a liquidity crisis in the financial markets.
As the government made a rare move to replace the board of IL&FS, a private and unlisted company, the turnaround efforts would be steered by Kotak as Non-Executive Chairman. A noted banker and chief executive of private lender Kotak Mahindra Bank, he was a instrumental in pushing corporate governance reforms in India. The Kotak-led panel on corporate governance, appointed by the Securities and Exchange Board of India, came out with sweeping reform measures for stronger corporate governance practices, most of which have been accepted.
On Monday, the National Company Law Tribunal (NCLT) cleared the names of six individuals, including that of Kotak, to be appointed as directors on the board of IL&FS as recommended by the government. Kotak would be the Non-Executive Chairman and the five other directors are Vineet Nayyar, G N Bajpai, G C Chaturvedi, Malini Shankar and Nand Kishore. “The new board is tasked with the responsibility of preparing a robust and time-bound resolution plan,” an official release said on Monday.
As per IL&FS’ latest balance sheet, infrastructure and financial assets worth over Rs 1,15,000 crore are presently facing tremendous debt pressure and struggling to service around Rs 91,000 crore in debt which is the outcome of its mismanaged borrowings in the past, another official release said on Monday.
“The financial mismanagement of the IL&FS is apparent from its rapid debt built up and misrepresentation of true state of financial fragility, which is being reflected in unprecedented rating downgrade from highly rated to a default category,” the government had said.