Govt okay with rejigging of crisis-hit IL&FS' long-term loans from PSBs

With half of IL&FS assets being invisible, the government is willing to allow a restructuring of loans

Last Updated : Oct 04 2018 | 5:30 AM IST

If Infrastructure Leasing & Financial Services (IL&FS) asks for it, the government will be okay with restructuring the long-term loans the company has taken from public sector banks (PSBs), said sources in the government on Wednesday. This is because half of the leveraged company’s assets are invisible.

An official aware of the matter said IL&FS would honour its short-term debts; only long-term debts would be restructured.

“With half of IL&FS assets being invisible, the government is willing to allow a restructuring of loans. Long-term loans will be rolled over,” said the official, adding that about Rs200-billion non-current assets of the company were intangible and cannot be sold.

This is half of the company’s non-current assets.

ALSO READ: Govt's rescue of IL&FS to succeed only if lenders take big haircut: Sources

The government had earlier said the consolidated financial statement of the holding company of IL&FS and its subsidiaries, associates, and joint ventures projected a picture through highly exaggerated depiction of non-current assets on the form of intangible assets.

ALSO READ: Behind the IL&FS crisis: India hasn't a clue how to pay for infrastructure

Along with this, there has been a sharp increase in bank deposits held in lien, which rose by Rs16.8 billion in 2017-18 (FY18). Overall, the company has a negative cash flow from operations. The net outflow was Rs 70.2 billion in FY18.

Since August, the company has been defaulting on loan repayments.

It has been noted that there is a deep mismatch in the company’s debt-equity ratio because of excessive leveraging, which has put a question mark in its ability to continue as a going concern

Many IL&FS projects are being implemented by 12 step-down subsidiaries. Lenders said most of them are overleveraged.

The PSBs and government institutions have a total exposure of Rs 570 billion to the IL&FS. They might feel the heat of defaults in their second quarter results this financial year.

Officials said most of the loans given by the PSBs have not yet turned into bad debts. They added that the IL&FS issue would not have an impact on regulatory capital requirements of these lenders.