IL&FS total defaults till date stand at Rs 46.4 bn, up 22% from Sept end

Latest default of November 19 was in lieu of two short-term deposit repayments of Rs 573 mn; earlier that day, it had defaulted on Rs 3 billion deposit repayments to MUDRA

Infrastructure Leasing and Financial Services (IL&FS), the beleaguered non-banking financial company (NBFC), has defaulted on debt obligations worth Rs 46.4 billion to date.

The latest default, reported by the company on November 19, was in lieu of two short-term deposit repayments worth Rs 573 million. On Monday, the company said, it had defaulted on principal and interest payments worth Rs 3 billion in respect to deposits from the Micro Units Development and Refinance Agency (MUDRA).

The defaults on debt obligations by the infrastructure-financier began in June this year, when IL&FS defaulted on inter-corporate deposits (ICDs) and commercial papers (CPs) worth Rs 4.5 billion.

By the end of September 2018, IL&FS’ subsidiaries, such as IL&FS Transportation Networks (ITNL) and IL&FS Financial Services, had defaulted on over Rs 38 billion worth of ICDs and CPs.

IL&FS Financial Services, the lending company, was barred from accessing the CP market till March 2019 according to the regulations set by the Reserve Bank of India (RBI) on NBFCs.

According to PRIME database, IL&FS had to repay Rs 18.06 billion non-convertible debentures (NCDs), bonds and CPs between October 2018 and March 2019.

In the past few weeks, ITNL defaulted on Rs 393.5 million worth of NCD redemptions, according to filings with the stock exchange.

A source told Business Standard, “The recent stay order of the National Company Law Appellate Tribunal (NCLAT) dated October 12, has placed a moratorium on the company and its 348 connected entities from making payments towards any loans, NCDs, CPs, deposits and other facilities.”

In its order, NCLAT had also placed a moratorium on any ongoing suits against IL&FS and its companies and also barred other parties such as banks or other investors from foreclosing, recovering or enforcing their security interest against the company.

On October 1, the Ministry of Corporate Affairs (MCA) moved the National Company Law Tribunal (NCLT) in Mumbai to take over the company under sections 241 and 242 of the Companies Act, 2013.

A statement by the MCA stated that they had to move the NCLT “to prevent further mismanagement to protect public interest”.

The NCLT granted the government to take over the company and suspended the Board of Directors of IL&FS and reconstituted it with government nominees. On October 31, the new board submitted a report on the ‘way forward’ for restoring the company’s health and confidence in the market.

By the end of September 2018, IL&FS’ total borrowings stood at Rs 910 billion on a net worth of Rs 54.3 billion, giving it a debt-equity ratio of 16.8x as of March 2018 — three times more than the average ratio in the NBFC industry.

The board of IL&FS said it would work towards a final resolution, in stages and parts, over the next 6-9 months, subject to the NCLT’s approval.

Some of the steps it outlined in the report included significant capital infusion at the group-level, selling some of the subsidiaries and specific asset monetisation.