IL&FS entities to be sold individually instead of whole company together

Govt likely to cite the current situation, including availability of funds in escrow accounts of certain IL&FS companies, for seeking the special dispensation

IL&FS entities will be sold individually instead of the whole company together, a senior government official said. The debt-ridden firm could expect a final resolution within six months, the official from the Ministry of Corporate Affairs (MCA) said, after a meeting of officials from his ministry and the finance ministry with lenders to the IL&FS.
 
Other officials said the government plans to approach the Reserve Bank of India (RBI) to seek deferring the provisioning for some of the IL&FS entities. It has been found that a number of companies under IL&FS have not been able to service debt. 
 
They said the government has identified a few IL&FS subsidiaries having ample funds in their escrow accounts but are unable to service their debt obligations. The government is likely to cite the current situation, including availability of funds in escrow accounts of certain IL&FS companies, for seeking the special dispensation, they added. This official cited above said the smaller subsidiaries will fetch more than the bigger ones, which is why the plan is to sell individual entities.
 
The issue of how to maximise recovery was discussed at the meeting. A senior MCA official present in the meeting said lenders were asked to arrive at a common view before the National Company Law Tribunal (NCLT). The new board led by Uday Kotak has been meeting regularly to find a resolution for the company. A report on the IL&FS submitted to the MCA states that the board should be looking to seek waivers from various regulatory agencies at the stage of getting the resolution plan approved.

 
IL&FS’ consolidated debt increased to Rs 91,091 crore in 2018 from Rs 48,671 crore in 2014. The interest outgo rose to Rs 7,922 crore from Rs 3,970 crore during the period. The company has not been making enough profits to repay its interest, leading to the default. Of the Rs 91,000-crore debt, Rs 57,000 crore has been borrowed from public sector banks.
 
IL&FS has defaulted on interest and principal on inter-corporate deposits (ICDs) of Rs 172 crore, which became due recently. For the first time, the company defaulted on ICDs — part of unsecured borrowings from other corporate entities — in June. It also defaulted on Rs 1,000 crore raised from SIDBI in the ICD market. The company has ICDs of Rs 1,400 crore.
 
On October 31, the new IL&FS board had presented a resolution plan to the NCLT. Meanwhile, public sector companies will start paying their dues to the IL&FS by December.
 
The Serious Fraud Investigation Office (SFIO) is also investigating the IL&FS books. Parallely, the Institute of Chartered Accountants of India (ICAI) had issued notices to the auditors of IL&FS to look at their role in the mess.