IL&FS recovery likely to be Rs 61,000 crore, 62% of total debt

The resolution from the IL&FS group is expected at Rs 61,000 crore of the total debt of Rs 99,355 crore, which is almost 62 per cent, said Uday Kotak, who was appointed the non-executive chairman of the company in October 2018 by the government after superseding the board at that time.

The resolution process of IL&FS started three and half years ago after a new management was appointed by the government. Kotak’s term as non-executive chairman in IL&FS will end on April 2, after which managing director CS Rajan will take charge as chaiman and managing director. The ministry of corporate affairs has appointed Rajan as CMD for six months, with effect from April 3.

About Rs 21,000 crore of debt has been discharged by way of asset monetisation and debt repayment with public sector lenders being major beneficiaries. “I am happy to say that the maximum money which is being returned is to public sector banks,” Kotak said while addressing the media.

“I want to credit the public sector banks, who are normally at the receiving end in most cases, for being smarter. They lent primarily at the SPVs, against security of the assets. They wanted to see the projects, they wanted to see the cash flows,” he said.

In addition, the group has nearly Rs 20,000 crore of cash and InvIT unit balance, including Rs 16,000 crore to be distributed to creditors by way of interim distribution post judicial approval.

Resolution for another Rs 14,000 crore of debt has been filed with the courts, of which Rs 7,500 crore has been approved and transaction closure is underway.

“The debt addressed to 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,” the company said in a statement.

Kotak said the recovery estimates are conservative and that there is a chance that the final recovery is higher than the current estimates.

The overall resolution estimate of 62 per cent is double the average recovery of 31 per cent under IBC, according to its December newsletter. “This has been largely possible due to the continued commitment of the New Board and the Management to preserve value in assets of national importance and maintaining going concern status,” IL&FS, which continues to service debt of Rs 1,000 crore across companies, said.

Of the 347 entities under IL&FS Group as of October 2018, 246 entities stand resolved, leaving 101 for the next financial year.

IL&FS also said 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. This has been made possible on account of IL&FS’ resolution framework and the underlying distribution formula,” the statement said.

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

He also said sovereign governments, particularly states, need 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 counterparty running around to collect legitimate dues,” Kotak said.

“On the core area of group resolution, I don’t think we have good legal answers to it and we are still evolving. We need to get that much faster. IL&FS is a case study of how we think about the future of structures regulation, governance and how we build a resolution framework in areas that are no man’s land,” he added.

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd

Iconic BKC building to be sold to Brookfield

The iconic IL&FS building in Bandra-Kurla Complex will be sold to Canadian investment firm Brookfield Asset Management for Rs 1,080 crore, at Rs 29,000 per square feet.

The sale is a part of the resolution process of the IL&FS Group that started in October 2018. The IL&FS Financial Centre was one of the early buildings in the business district of BKC. The deal, which is awaiting nod from NCLT, is part of IL&FS’ incremental resolution of Rs 2,700 crore since November 2021.

“The incremental resolution of over Rs 2,700 crore... 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 company said.