Need to get cracking on judicial process to move faster: Uday Kotak
Infrastructure Leasing and Financial Services (IL&FS) has resolved a total of Rs 55,000-crore debt during the past three-and-a-half years after a new board headed by Uday Kotak took over the beleaguered firm. Further, billionaire banker Kotak’s term as chairman of IL&FS ends on April 2.
The new board, however, continues to face challenges in implementing the resolution, thereby impacting timeliness. Some of these challenges pertain to the existence of complex share-holding arrangements and web of infra group borrowings, non-payment of dues by state utility to ITPCL and delay in receipt of annuities from some state governments. The group continues to implement its three pronged strategy of resolution, restructuring and recovery to maximise recoveries for all classes of creditors while adopting an equitable distribution approach and balancing the interests of stakeholders.
Commenting on the resolution process, Uday Kotak said: “Sovereign governments, particularly state governments, need to respect contracts. Cannot be that you sign a contract and if it does not suit you, you don’t pay up and have the counter party running around to collect dues. We also need to get cracking on the judicial process to move faster. It is a serious challenge for development of business in our country.”
On the subject of group resolution, Kotak said there were no legal answers to it and that “we are still evolving.” “IL&FS is a case study of how we think about the future of structures regulation, governance and how we build a resolution framework in areas that are no man’s land.”
The debt addressed till date (Rs 55,000 crore) represents over 90% of the overall estimated resolution value. The resolution of remaining6,000 crore debt will now move into the next financial year, the new board, providing a periodic update on the ongoing resolution process of IL&FS, said.
The IL&FS group retained its overall resolution estimate at Rs 61,000 crore, about 62% of the overall fund- and non-fund-based debt of over Rs 99,000 crore, as of October 2018. This is double the average recovery of 31% under IBC.
“This has been largely possible due to the continued commitment of the new board and the management to preserve value in assets of national importance and maintaining going concern status,” it said.
Of the 347 entities under IL&FS Group as of October 2018, a total of 246 entities’ debt have been resolved, and that of the remaining 101 would be addressed in the next financial year.
IL&FS has also filed an application before the National Company Law Appellate Tribunal for undertaking interim distribution of Rs 16,000 crore of cash and InvIT units available across the group.
Over 75% of this would be distributed to creditors of three large holding companies — IL&FS, IL&FS Financial Services (IFIN) and IL&FS Transportation Networks (ITNL) — which have a large base of public fund creditors.
The incremental resolution of over Rs 2,700 crore since November 2021 comprises Rs 1,080 crore from sale of IL&FS headquarters in BKC Mumbai, Rs 900 crore under Khed Sinnar claim settlement with National Highways Authority of India, Rs 230 crore from settlement of IFIN’s non-performing loan accounts and Rs 520 crore from other recoveries.
In addition, the Group continues to service debt of Rs 1,000 crore across companies.
ITNL completed transfer of two road assets (Sikar Bikaner Highway and Moradabad Bareilly Expressway) to Roadstar Infra Investment Trust at an enterprise value of Rs 4,200 crore. Transfer of remaining special purpose vehicles to the InvIT is being undertaken in multiple phases, it added.
Following the ending of Kotak’s term, IL&FS MD CS Rajan has been appointed as chairman and managing director of IL&FS for six months, effective April 3, 2022.