When the crisis at IL&FS (Infrastructure Leasing & Financial Services) exploded in September 2018, many saw it as India's Lehman Brothers moment, when the US investment banking firm collapsed ahead of the 2008 global financial crisis. The concern was that the fall of one of India's biggest financiers of infrastructure projects in the NBFC (non-banking financial company) space would trigger a spate of such crashes and loan defaults, sending lakhs of crores of rupees of public money down the drain and leading to thousands of job losses. IL&FS had amassed a debt of Rs 99,355 crore—nearly as much as the Centre's allocation to states to build infrastructure projects this fiscal—the bulk of it borrowed from public sector banks, and was in no position to repay it. The company closed the 2017-18 financial year with revenues of Rs 18,799 crore on a consolidated basis, and a loss of Rs 1,886.85 crore. In a swift action akin to the one taken in the January 2009 'Satyam Scam', the Centre in October 2018 replaced the entire IL&FS board with a new, six-member board, and made Uday Kotak, managing director & CEO of Kotak Mahindra Bank, its non-executive chairman. On April 2, as Kotak's term at IL&FS ended and he passed on the baton to the current chairman & managing director C.S. Rajan, the company claimed it had resolved Rs 55,000 crore of its total outstanding debt, with Rs 21,000 crore already out of its books. With this, Kotak and his team met 90 per cent of the target they had set: a realistic Rs 61,000 crore of the outstanding debt.
Stakeholders in Corporate insolvency resolution would do well to heed the advice veteran banker Uday Kotak had to offer as his tenure as the non-executive chairman of IL&FS ended last week. After the collapse of IL&FS in 2018, Kotak assumed charge and oversaw the resolution of over Rs 61,000 crore of the group's overall debt of Rs 94,000 crore. A part of this is either awaiting distribution or is pending recovery as there are ongoing legal challenges. Compared to the average recovery of 33% (as of December 2021) of creditors' claims under the Insolvency and Bankruptcy Code (IBC) regime, the IL&FS recovery record is outstanding, specially because of the complicated task involving various layers and legal entities. Some experts argue the IBC shouldn't be judged by recovery score alone as the law is merely a facilitator of reorganisation that is ultimately determined by market forces. But Kotak's advice should be taken seriously for better recoveries and even prevention of corporate stress.
In 2018, the collapse of IL&FS had triggered a panic in financial markets. With liquidity drying up, non-banking financial companies (NBFCs), in particular, came under acute financial stress. Subsequently, the government constituted a new board, with Uday Kotak appointed as non-executive chairman, to manage the affairs of the beleaguered infrastructure behemoth. Now, almost three and a half years later, the process has successfully addressed the resolution of Rs 55,000 crore of the group's debt. Resolution of another Rs 6,000 crore of debt is expected to be finalised in the coming financial year. Considering that the group's total debt was just shy of Rs 1 lakh crore, this translates to a recovery rate that is higher than that observed under the IBC — at the end of December2021, under IBC proceedings, financial creditors had realised only 33 per cent of their claims in cases where a resolution plan had been approved.
On April 2, the troubled Infrastructure Leasing and Financial Services Limited (IL&FS) will see a major transition of power. After more than three years, the government appointed non-executive chairman, banker Mr Uday Kotak, will exit his role. His replacement, as chosen by the Union ministry of corporate affairs, is former officer of the Indian Administrative Service C S Rajan, who has been managing director of the group since April 2019. Mr Rajan's last post in government was as chief secretary of Rajasthan, and he retired in 2016 after which he served on the state chief minister's advisory council. The handover of power is the appropriate time to assess how the recovery efforts for IL&FS have progressed, and what the lessons of this unfortunate episode might be.
Uday Kotak will step down as chairman of IL&FS after three and a half years with current MD C S Rajan taking over as CMD. According to Kotak, around Rs 55,000 crore of debt has been resolved, which represents nearly 90% of the expected resolution. Kotak also announced the sale of IL&FS's iconic headquarters to Canadian private equity investor Brookfield for Rs 1,080 crore. He estimated the realisation at 62% of the total debt of Rs 99,000 crore.
Infrastructure Leasing & Financial Services Ltd (IL&FS) has addressed debt resolution of Rs 55,000 crore, or nearly 55 per cent of the debt, after the group became a defaulter, and the government superseded its board in October 2018. The tenure of Uday Kotak as non-executive Chairman will end on April 2 and the Ministry of Corporate Affairs has appointed CS Rajan Chairman and MD of IL&FS for six months with effect from April 3. The IL&FS group retained its overall resolution estimate at Rs 61,000 crore, representing 62 per cent of overall — fund-based and non-fund based—debt of over Rs 99,000 crore as of October 2018. "IL&FS is a case study for how we should think about the future of structure, regulation and governance and how we built a resolution framework in areas that are non-man's land," Kotak said.
Bankrupt infrastructure financier IL&FS on Tuesday said that it has resolved the debt of nearly Rs 55,000 crore at the end of March and retained its aggregate debt resolution target of Rs 61,000crore, which is 62% of the total debt. The group has a total debt of Rs 1 lakh crore. The board also said that the IL&FS headquarters at BKC, Mumbai, has been sold to Brookfield for Rs1,080 crore. The letter of intent has been issued and the handover will happen soon.
Infrastructure Leasing And Financial Services (IL&FS) has resolved atotal of Rs 55,000-crore debt during the past three-and-a-half years after a new board headed by Uday Kotak took over the beleaguered firm. Further, billionaire banker Kotak's term as chair¬man of IL&FS ends on April 2. The new board, however, continues to face challenges in implementing the resolution, thereby impacting timeliness. Some of these challenges pertain to the existence of complex share-holding arrangements and web of infra group borrowings, non-payment of dues by state utility to ITPCL and delay in receipt of annuities from some state governments. The group continues to implement its three pronged strategy of resolution, restructuring and recovery to maximise recoveries for all classes of creditors while adopting an equitable distribution approach and balancing the interests of stakeholders.
Crisis-hit Infrastructure Leasing & Financial Services Ltd (IL&FS) has resolved nearly 55% of the group's outstanding debt over the last three-and-a-half years, managing director C.S. Rajan said on Tuesday. Among others, the company sold its iconic headquarters at Bandra Kurla Complex for Rs1,080 crore to reduce debt. With this, Kotak Mahindra Bank managing director (MD) and chief executive officer (CEO) Uday Kotak, who has been serving as non-executive chairman of IL&FS, will step down on 2 April, and Rajan will take charge on 3 April as chairman & MD for six months.
Crisis-hit Infrastructure Leasing & Financial Services Ltd (IL&FS) has resolved nearly 55% of the group's outstanding debt over the last three-and-a-half years, managing director CS Rajan said on Tuesday Among others, the company sold its iconic headquarters at Bandra Kurla Complex for Rs 1,080 crore to reduce debt. With this, Kotak Mahindra Bank managing director (MD) and chief executive officer (CEO) Uday Kotak, who has been serving as non-executive chairman of IL&FS, will step down on April 2, and Rajan will take charge on April 3 as chairman & MD for six months. Nearly Rs 55,000 crore of IL&FS's total debt of Rs 99,000 crore has been resolved, and this is 90% of the estimated debt resolution of Rs 61,000 crore, Rajan said at a press conference