New Delhi: Infrastructure Leasing and Financial Services Ltd (IL&FS) shuttered 45 of its 347 group firms that were allegedly used to round-trip loans and funds, said a person aware of the development, requesting anonymity.

The debt-laden company also almost halved its workforce to 8,000 permanent and contract employees, the person said.

IL&FS said in a 3 April presentation that it planned to close 45 entities. Interestingly, 42 of those were registered overseas.

This comes in the wake of ongoing probes by various regulatory agencies into the role of some of the directors on the board of IL&FS, rating agencies and statutory auditors of group companies.

The IL&FS group had a debt of more than 99,358 crore as of September 2018. Its default on debt payments caused a liquidity crisis among non-banking financial companies in India.

Fearing the crisis could snowball to impact the entire financial sector, the Union government had in October 2018 replaced IL&FS’s previous management with an Uday Kotak-led board to oversee the company’s resolution process.

Earlier, “there were 347 companies in total. The number has come down to 302. The rest of the firms have been closed down. There was no activity in those firms. They were only firms in name and were used to round-trip loans and funds", said the person cited earlier.

Of the 302 functioning IL&FS group firms, 133 are registered overseas.

Responding to a query on closing down the 45 group firms that were allegedly used to round-trip loans and funds, an IL&FS spokesperson shared a slide of the presentation cited earlier and which is available on the company’s website. The spokesperson didn’t provide a specific comment on this issue.

The exercise to close the 45 companies was also an attempt to simplify the complex structure at IL&FS, where there are up to four layers between the holding company and the operating subsidiaries.

Investigators are looking into how the financial crisis building up over the years went undetected till group firms started defaulting on repayment obligations.

The Serious Fraud Investigation Office (SFIO), under the ministry of corporate affairs, was tasked by the government to investigate the financial failures at IL&FS.

SFIO earlier arrested Ramesh C. Bawa, a former managing director and chief executive officer of IL&FS Financial Services Ltd. Hari Sankaran, a former vice-chairman of IL&FS, is also in custody.

Meanwhile, the staff strength at IL&FS has reduced by 43%.

“IL&FS had permanent staff of 5,000, and a contractual staff of around 9,000. Half of them have gone. The permanent staff strength has come down to 2,500," said the person cited earlier. “In the contractual staff, wherever there are ongoing works such as roads, some are there and some have gone. The total strength including contractual stuff has come down to 8,000."

According to the information provided by the IL&FS spokesperson in an email, “The new board has taken various initiatives towards rationalized manpower with a view to reduce costs associated therewith," and cited steps such as “salary rationalization of employees", “separation of superannuated consultants", “discontinuation of business/vertical", “talent structuring’, “amalgamation of roles and responsibilities," and “identification of group companies towards closure".

“The new board will be taking up the aforesaid manpower optimization initiatives across the IL&FS group in two phases," the spokesperson said in the email.

“Phase I will contemplate initiatives like salary rationalization of employees, separation of superannuated consultants, which have been executed. The said steps are likely to yield net savings of approximately 1,000 million ( 100 crore) annually. Phase II initiatives including talent restructuring, amalgamation of roles and responsibilities are under process. These steps will yield an approx. 50% savings in the wage bill of the IL&FS Group. Several other initiatives are being initiated and that will bring down total manpower of the IL&FS Group by approximately 65% and wage cost by 50%, respectively."