The government-appointed management committee of the IL&FS Group says it expects at least half of the group’s debt to be resolved, recovered or restructured. And, to do a significant portion of that by March 2020.
“(That is) our good faith view at this point of time,” said Uday Kotak, the recently appointed non-executive chairman. “When we are saying 50-plus per cent is our estimate, we are saying that we are confident of actual resolution or recovery of at least 50 per cent of Rs 94,000 crore.”
The group is in the process of addressing Rs 36,400 crore of debt till date, of which recovery or resolution of at least Rs 30,000 crore is expected, it says. For now, the group is targeting low hanging fruit. Such as the sale of the wind energy subsidiary to ORIX Corp, for which the National Company Law Tribunal has given permission, with banks also expected to shortly do so. The amount of Rs 4,320 crore related to the Special Purpose Vehicle in question can be fully recovered through the deal, says the management.
On the other ‘green’ entities, or group firms that can service debt on their own, the management says it is trying to make these “positive equity” and then pass it on to entities that can better manage these. For now, Rs 7,930 crore of such dues are getting addressed.
For ‘Amber’ or ‘Red’ companies in roads and education, bids are being submitted to the committees of creditors (CoCs). The company has received bids of Rs 8,100 crore for these companies that hold debt of Rs 10,150 crore. For entities with low or no bids, the management will consider an infrastructure investment trust (InvIT) model. At present, the net cash available is Rs 3,200 crore. The InvIT model will be particularly considered for nine domestic road projects with total debt of Rs 10,800 crore. Of these, the group got lower bids for five projects and none for the remaining four.
The final decision on whether to accept the bids or the InvIT model will rest with the lenders. IL&FS is also considering an option whereby lenders convert their debt to units in the InvIT for these nine projects.
In September, IL&FS said it had got binding bids worth Rs 13,000 crore for 10 road projects with combined debt of Rs 17,700 crore. The group on Tuesday said it had decided to send five of these bids for CoC approval, for debt worth Rs 9,500 crore.
Also on Tuesday, it said a bid had come from abroad for its road project in China, where debt exposure is Rs 1,600 crore. “The binding bid received is with equity value,” IL&FS said.
The group is also in discussions with lenders for restructuring debt worth Rs 8,000 crore for its Tamil Nadu power project.
Officials added the group’s engineering entity, IL&FS Engineering and Construction Company, will start participating in these project works. The management committee said these orders will be pursued either through joint ventures or back-ended contracts.
The group will also look to monetise its real estate assets, including its headquarters building in Mumbai. The management committee is hopeful of Rs 3,000 to Rs 3,500 crore from this sale. Kotak attributed the Mumbai building alone to be worth upward of Rs 1,500 crore.
In the past year, the group cut jobs by a third, through both voluntary exits and dismissals, to 16,000 employees from the earlier figure of 22,000.
The management committee says it has also adopted a 'cash conservation culture', with a balance of Rs 5,300 crore as of end- August. Recovery of loans from non-IL&FS group entities was about Rs 1,200 crore. The group also restructured debt worth Rs 5,100 crore, moving three entities from amber to green category.
IL&FS was a complex pyramid, of 302 entities – 169 domestic and 133 international ones, present across 11 countries, with a four-layered structure.
Vineet Nayyar, the newly appointed executive chairman, and former head of Mahindra Satyam (Mahindra acquired Satyam after the latter's promoter was jailed for major fraud) said IL&FS’ former management had no value for money. Heads of various entities fought own turf wars.
“I have never seen so many automobiles in a company than I see here," he observed. "Over-expenditure was a trait. Even Satyam had far better controls; it was, in many ways, a very well-managed company as compared to (IL&FS).