Crisis-hit IL&FS lays road map to cut 57% of Rs 99,000 crore debt

By March, Rs 50,500 cr debt to be pared; resolution for Rs 6,650 cr to continue beyond FY21

Infrastructure Leasing & Financial Services (IL&FS) laid down a road map on Monday to resolve 57 per cent of the group’s nearly Rs 1 trillion debt pile. The group said debt worth Rs 50,500 crore would be pared by the end of financial year 2020-21, and resolution of an additional Rs 6,650 crore would continue beyond FY21.

This takes cumulative debt to be addressed to Rs 57,240 crore, or 57 per cent of the group’s total debt of Rs 99,000 crore.

In October also the group had said it expected to resolve, recover, or restructure at least half of the group’s debt, and aimed to achieve a significant part of it by March 2020. But as of June, only 18 per cent of the entire debt amounting to around Rs 17,640 crore had been pared, and number of entities were reduced to 276 from 347.

The latest timeline, too, the board said, is subject to regulatory approvals and other litigations. The group announced plans to set up an infrastructure investment trust (InvIT) for its road assets with a gross value target of Rs 13,000 crore in the December quarter. It also said by March 2021 only 60 group entities would remain.

Since the IL&FS board, led by Uday Kotak, non-executive chairman, has estimated the resolution amount at a little over Rs 57,000 crore, lenders to the group are likely to take a fairly large haircut on their exposure. C S Rajan, managing director, IL&FS said: “The debt that remains unresolved at the end of the period is the haircut that the lenders have to take. This is not unsurprising as it still compares very favorably to the insolvency and bankruptcy process.”

According to the new plan, the firm will address Rs 8,800 crore of debt by end of September via entity sale, debt restructuring, and other means. This will be followed by an additional Rs 18,000 crore resolution in the December quarter, and another Rs 6,150 crore resolution in the March quarter, driven by the second phase of the InvIT, and monetisation of real estate assets.

Members of the board said Covid-19 had impacted the resolution timeline. In a particular road asset sale, the board said, an Italy-based lowest bidder withdrew after the pandemic hit. “It (Covid) delayed the real estate asset monetisation process and we will see some implication on value realisation. Moreover, because of the pandemic, getting approvals from the system is taking a longer time,” Kotak said. 

One of the entities where the new board found it challenging to recover money is IL&FS Financial Services (IFIN). “The IFIN comprises large exposures to a few large groups who themselves are in very deep trouble. We have virtually recovered no money from them. Many of these groups are under insolvency process. The quality and the characteristics of the underlying borrowers is such that the new board cannot understand the logic and the prudence of why the loans were given,” Kotak said.

IFIN is the non-banking finance arm of IL&FS with an asset book of Rs 18,000 crore. Of the total asset book, roughly 50 per cent of the loans are to the IL&FS entities and the rest is to external borrowers.

The group's four holding companies — IL&FS, IFIN, IL&FS Transportation Networks (ITNL), IL&FS Energy Development Company (IEDCL) — have a consolidated debt of Rs 48,000 crore, which is 51 per cent of the total debt pile.