IL&FS Transportation Networks borrowed Rs 450 mn from Karnataka road SPV

In a curious case, IL&FS Transportation Networks (ITNL) has borrowed an amount as low as Rs 450 million from one of its special purpose vehicles (SPVs). The road SPV, in turn, had to dip into its emergency funds to loan the amount.

“North Karnataka Expressway Limited (NKEL) has withdrawn a sum of Rs 450 million from its designated accounts which include the Debt Service Reserve Account (DSRA), Major Maintenance Reserve Account (MMRA) and Contingency Reserve to provide a loan to its sponsor, IL&FS Transportation Networks Limited (ITNL)," CARE Ratings said in a note dated September 4 on NKEL which downgraded NKEL’s rating to CARE AA+(SO) with a negative outlook.

It is unclear why ITNL would need its SPV to extend a loan to itself. An email query sent to ITNL on Tuesday remained unanswered. "This shows the extent of liquidity crunch and does not come across as the best of corporate governance," said an analyst who did not wish to be identified.

NKEL is promoted by a consortium of ITNL Road Investment Trust (74% stake), Infrastructure Leasing & Financial Services Limited (6.50% stake), Punj Lloyd Limited (6.50% stake) and ITNL (13% stake).