kotak: IL&FS resolution under Kotak completes Rs 61,000 crore of Rs 99,355 crore debt

Three-and-a-half years after the government asked banker Uday Kotak to head a new board to salvage the largest non-banking infra lender IL&FS that went belly up in October 2018, the management has announced the resolution of Rs 61,000 crore or 62 per cent of the Rs 99,355 crore the group with 347 entities owed to the system. Addressing the media, Kotak also announced the end of his term as the chairman of the six-member board from April 2, and the elevation of managing director C S Rajan as chairman and managing director for a six-month term.

Explaining the recovery of Rs 61,000 crore which is 62 per cent of the total IL&FS owed to banks and other lenders across 347 group entities, Kotak said as of March 29, they have completely addressed Rs 55,000 crore debt through the sale of assets and or taking the companies back as running concerns, along with a few best of them paying back Rs 1,000 crore in interest alone by fully servicing loans.

Of the total 347 entities, 248 have been resolved, Kotak said, adding, the group had over 100 entities overseas and of the remaining 101 entities some are defunct and only the government can take a call on them.

Of the Rs 55,000 crore of addressed debt, up from Rs 52,200 crore in early November 2021, means the board has been able to meet 0ver 90 per cent of its commitment made for this fiscal, he said.

Of the Rs 61,000 crore of aggregate resolution, Rs 21,000 crore have been fully discharged/paid back by way of asset monetization and surprisingly, Kotak said, public sector banks, which lent only to operating SPVs, gained the maximum from the resolution, while the so-called better-nosed private sector banks went by external credit ratings and lost badly.

Yet 62 per cent recovery is one of the best and is exactly double of the average IBC recoveries as of December 2021 at a low 31.3 per cent, Kotak said, adding IL&FS resolution is not under the IBC process under sections 241 &242 of the Companies Act.

That apart, the group has a cash balance or cash equivalents in the form InVits of Rs 20,000 crore, of which Rs 16,000 crore will be paid to creditors as soon as the judicial approvals are in and the remaining Rs 4,000 crore will be kept for company expenses, he added.

Thirdly, the group is awaiting a resolution of Rs 14,000 crore pending court approvals, and of this Rs 7,500 crore have been approved by the board and will be closed at the earliest post legal nods.

Explaining how they went about doing their public duty, Rajan said it was largely possible due to the continued commitment of the board to preserve the value in assets of national importance and maintaining going concern status. Of the total of 347 entities as of October 2018, 248 entities stand resolved, leaving only 101 entities to be resolved in the next financial year.

He also said an application has been filed with NCLAT seeking to make interim distribution of Rs 16,000 crore to creditors. Over 75 per cent of this would be distributed to creditors of three large holding companies of IL&FS, IFIN and ITNL, which have a large base of public fund creditors, he added.

The incremental resolution of over Rs 2,700 crore since November 2021 comprises Rs 1,080 crore from the sale of the iconic IL&FS headquarters (TIFC) in BKC to Brookfield, Rs 900 crore from Khed Sinnar settlement with NHAI, Rs 230 crore from settlement of IFIN’s non-performing loan accounts and Rs 520 crore from other recoveries, Rajan said, adding the group also continues to service debt of Rs 1,000 crore across companies.

ITNL has completed the transfer of two road assets (Sikar Bikaner Highway and Moradabad Bareilly Expressway) to Roadstar Infra Investment Trust at a cumulative valuation of Rs 4,200 crore. Transfer of the remaining SPVs to the InvITs is being undertaken in multiple phases, Rajan said.

But both Rajan and Kotak underlined the challenges they faced and the new board will continue to face in completing the resolution, which in turn, have impacted timelines. Their job so far is a fit case-study and one of the biggest learnings in their carrier they added. Rajan said the group will continue 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.

Both Rajan and Kotak said they hope to completely recover the Rs 14,000 crore near-complete resolution through the course of FY23.