Assessing IL&FS financial situation, searching viable solutions

Uday Kotak looking into all options are to salvage the financial position


The new Board of debt-stricken IL&FS is in the process of assessing the company’s financial situation and is deliberating on various viable solutions to restore solvency.

Union Finance Minister Arun Jaitley said the government is determined to ensure that the company’s insolvency issue is contained quickly to prevent further adverse impact.

Addressing the media, after the new Board’s first meeting here, Uday Kotak, MD & CEO of Kotak Mahindra Bank, recently appointed as the non-executive Chairman of the company, said all options are being looked at to salvage the financial position of IL&FS.

"This is a process which is under NCLT process, which is a process independent of…at this stage, in terms of having more detailed discussion with the shareholders…..we will be talking to the shareholders at an appropriate time."

Without ruling out options like sale of assets and rights issues, Kotak refuted comparisons being made between IL&FS and the IT major Satyam that went bust nearly a decade ago.

"This is a very complex company…one has to keep that in mind and it is a financial market intermediary but also in the real world space. Therefore there are significant financial market challenges which make it a little different from directly comparing with the Satyam situation," he said.

The meeting comes days after the Central government superseded the management of the beleaguered company via a NCLT order and appointed a six-member board led by Kotak to restore its financial solvency.

Key public sector lenders and undertakings such as LIC and SBI have a 25.34 per cent and 6.42 per cent stake, respectively, in the firm which has around Rs 91,000 crore in long-term debt.

As per some industry estimates, the company has an urgent liquidity requirement of around Rs 5,000 crore.

Lately, the credit crunch has led a few of the company’s subsidiaries to default in servicing some of the inter-corporate deposits.

Subsequent to defaults, rating agency ICRA downgraded the ratings of its short-term and long-term borrowing programmes.

Earlier on Thursday, Finance Minister Arun Jaitley told reporters in New Delhi that there had been "significant impact" on the capital market on account of the contagion effect of the IL&FS problem which had prompted the government to replace the Board.

"The government is determined to make sure that since this is an internal factor to India, this should be contained quickly so that no adverse impact of it is left," he said.

IL&FS Ltd is a core investment company and serves as the holding company of the IL&FS Group, with most business operations domiciled in separate companies which form an ecosystem of expertise across infrastructure, finance and social and environmental services.

Initially promoted by the Central Bank of India (CBI), Housing Development Finance Corporation Ltd and the Unit Trust of India, IL&FS was incorporated in 1987.

Over the years, it has inducted institutional shareholders including SBI, LIC, ORIX Corp of Japan and Abu Dhabi Investment Authority (ADIA).

As on March 31, 2018, LIC and ORIX Corp are the largest shareholders in IL&FS with their stakeholding at 25.34 per cent and 23.54 per cent, respectively.

Other prominent shareholders include ADIA (12.56 per cent), HDFC (9.02 per cent), CBI (7.67 per cent) and SBI (6.42 per cent).

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