IL&FS resolves Rs 55,000-cr debt; Uday Kotak to exit as tenure ends

The tenure of Uday Kotak as non-executive Chairman will end on April 2 and the Ministry of Corporate Affairs has appointed CS Rajan Chairman and MD of IL&FS for six months with effect from April 3. The IL&FS group retained its overall resolution estimate at Rs 61,000 crore, representing 62 per cent of overall — fund-based and non-fund based — debt of over Rs 99,000 crore as of October 2018. “IL&FS is a case study for how we should think about the future of structure, regulation and governance and how we built a resolution framework in areas that are non-man’s land,” Kotak said.

“The debt addressed till date (Rs 55,000 crore) represents over 90 per cent of the overall estimated resolution value. Resolution of remaining Rs 6,000 crore debt will move into FY23,” IL&FS MD CS Rajan said.

IL&FS’ headquarters at Bandra Kurla Complex in Mumbai has been sold to Brookfield for Rs 1,080 crore. “One of the toughest things for me was on March 25 when we filed with NCLT for the sale of this iconic building,” said Kotak. On October 2, 2018, the government stepped in to take control of crisis-ridden IL&FS by moving the National Company Law Tribunal (NCLT) to supersede and reconstitute the board of the firm, which has defaulted on a series of its debt payments. The incremental resolution of over Rs 2,700 crore since November 2021 comprises Rs 1,080 crore from sale of IL&FS Headquarters (TIFC) in BKC Mumbai, Rs 900 crore under Khed Sinnar claim settlement with NHAI, Rs 230 crore from settlement of IFIN’s non-performing loan accounts and Rs 520 crore from other recoveries.

The overall resolution estimate of 62 per cent is double the average recovery of 31 per cent under IBC1. This has been largely possible due to the continued commitment of the new board led by Kotak and the management to preserve value in assets of national importance and maintaining going concern status.
Of the 347 entities under IL&FS Group as of October 2018, a total of 246 entities stand resolved, leaving 101 entities to be resolved in the next financial year. An application has been filed with NCLAT for undertaking interim distribution of Rs 16,000 crore of cash and InvIT units available across the group. Over 75 per cent of this would be distributed to creditors of three large holding companies — IL&FS, IFIN and ITNL — which have a large base of public fund creditors.

In addition, the IL&FS group continues to service debt of Rs 1,000 crore across companies. ITNL completed transfer of two road assets (Sikar Bikaner Highway Limited and Moradabad Bareilly Expressway Ltd) to Roadstar Infra Investment Trust at a cumulative enterprise valuation of Rs 4,200 crore. Transfer of remaining SPVs to the InvIT is being undertaken in multiple phases, Rajan said.
The new board of IL&FS continues to encounter several challenges in completing the resolution, which in turn, have impacted timelines, it said.

We need to move much faster: Kotak

On the debt resolution process in the country, Uday Kotak said, “We need to get cracking on getting our judicial process to move much faster. It is a very serious challenge for development of business in our country.”

“Sovereign governments, particularly state governments, needs to respect contracts. Cannot happen that you sign a contract and if it doesn’t suit you – you don’t pay up and have the counter party running around to collect legitimate dues,” Kotak said. On the core area of group resolution, Kotak said, “I don’t think we have good legal answers to it and we are still evolving. We need to get that much faster.”