IL&FS Expects To Resolve Half Of Rs 95,000-Crore Debt By Next Year, Says Uday Kotak
Headquarters of Infrastructure Leasing & Financial Services Ltd. in Mumbai. (Photographer: Abhijit Bhatlekar/Bloomberg News)

IL&FS Expects To Resolve Half Of Rs 95,000-Crore Debt By Next Year, Says Uday Kotak

Infrastructure Leasing & Financial Services group is likely to resolve half of its Rs 95,000-crore debt by next year through asset sales, restructuring and liquidation, according to Uday Kotak.

The board—appointed by the government to rescue the group—manged to resolve or find a resolution for a little over Rs 30,000 crore worth of debt since taking over in October 2018, according to Kotak who is chairman of the IL&FS group. Over the next few months, it will sell the group’s technology, environment and business process outsourcing assets and is engaging with public sector companies and state governments with which it has joint ventures.

The aim is to ensure that group companies are capable of servicing their debt without any delay, according to the billionaire banker. The focus is to restructure the debt of companies which are either struggling to make repayments or have completely stopped paying, he said.

The government extended Kotak’s term as chairman till Oct. 2, 2020 in an exception to the Banking Regulation Act, according to an Oct. 1 notification by the Ministry of Finance. The Act bars a bank chief from holding a board position in another financial services firm.

Here’s the progress made on debt resolution so far:

  • 12 amber category entities—that can meet operational obligations—have received debt restructuring proposals from lenders.
  • Successfully restructured debt of three entities with dues of Rs 5,100 crore.
  • Sale of wind energy assets to Orix Corporation of Japan to be completed by Oct. 20.
  • Bids received for 10 out of 14 road assets with debt of Rs 12,850 crore.
  • Bids for five projects with a total debt of Rs 9,500 crore being submitted to the relevant committee of creditors.
  • Bids of Rs 630 crore received for four education assets to be submitted to the CoC.
  • Bids received for Chonqing Yuh, a road project in China with debt of Rs 1,600 crore.
  • Public process launched for asset-monetisation of 65 entities—54 domestic and 11 international.

Kotak said the recovery and restructuring process to resolve 50 percent of IL&FS dues does not include funds that the group will receive through claims and compensation. The board has been engaging with the National Highways Authority of India and the Ministry of Roads Transport and Highways to settle claims and counter-claims, he said.

So far, they have terminated or foreclosed five projects and reached settlement for ITNL Road Infrastructure Development Company Ltd.’s projects, for which compensation is yet to be received.

Recently, IL&FS Infrastructure Ltd. handed over operations of the Gurugram Rapid Metro to the Haryana Urban Development Authority. The company will be compensated for the work, he said.

The board also managed to revive IL&FS Engineering and Construction Company Ltd. and preserve Rs 900-crore value in the engineering-procurement-construction arm.

It received over Rs 220 crore in claims filed against various parties, completed projects for which guarantees worth Rs 437 crore were released. Revived projects saved Rs 230 crore of guarantees from devolving, he said.

Next Priorities

While another Rs 18,000 crore of debt is yet to be addressed to meet the 50 percent target, Kotak said the challenge will be to ensure fair distribution of funds recovered to stakeholders.

The board plans to dispose of vast tranches of land and real estate assets, estimated to be worth between Rs 3,000 crore and Rs 3,500 crore.

The board is considering to set up an infrastructure investment trust for the nine road assets that received no or low bids, according to N Sivaraman, chief operating officer. Other IL&FS companies, private equity players and group’s creditors will be allowed to invest in the InvIT which will have a debt worth Rs 10,380 crore, he said.

The proposal is still being considered as it can be used to attract a lower cost of capital for investments, he said, adding that “we will give options to our lenders before foreclosing on any decision regarding the InvIT assets”.

In the coming months, the board also hopes to resolve over Rs 1,200 crore from loans given by IL&FS Financial Services Ltd. to companies outside the group.

Also read: Why Vineet Nayyar Thinks Satyam Was Better Managed Than IL&FS

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.