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MUMBAI : 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 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 2 April, and Rajan will take charge on 3 April as chairman & MD for six months.

Nearly 55,000 crore of IL&FS’s total debt of 99,000 crore has been resolved, and this is 90% of the estimated debt resolution of 61,000 crore, Rajan said at a press conference.

21,000 crore of debt has been paid back to public sector banks. Another 16,000 crore worth cash and InvIT units will be distributed by way of interim distribution to creditors post judicial approval," said Rajan. “Resolution of 14,000 crore has been filed with courts, of which 7,500 crore has been approved by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), and are in final stages of resolution," he added.

Of the 347 entities under IL&FS Group as of October 2018, a total of 246 entities have been resolved, leaving 101 entities to be resolved in the next fiscal year, he said.

“An application has been filed with the NCLAT for undertaking interim distribution of 16,000 crore of cash and InvIT units available across the group. Over 75% of this will be distributed to creditors of three large holding companies—IL&FS, IFIN, and ITNL," Rajan said. “Earlier, 21,000 crore was paid to SPV (special purpose vehicle) lenders," he added.

Kotak said, “Our aim was to keep the assets as going concern and maximize creditor value. These are national assets which we needed to protect," he said. “Maximum amount of money was returned to public sector banks. I want to credit the PSU banks for being smarter as they lent primarily to SPVs against securities of assets and project cash flows. The so-called smart cats which depended on rating agencies came in unsecured," he added.

The learning from the IL&FS experience is to avoid complex, hydra-like structures, which get out of control, and proper regulatory control is needed over such entities, Kotak said.

“IL&FS is a case study for how we think about the future of structure, regulation and governance, how we build a resolution framework in areas which are no man’s land," he added.

As a banker, the biggest learning from this experience is to not lend where you don’t understand the business structure. He said banks must do their own diligence, not rely on rating agencies etc., he added.

Kotak also said recoveries could be higher than 61,000 crore, going forward under the new leadership.

“The toughest thing for me was to file for the sale of the IL&FS headquarters to Brookfield on 25 March. It was one of the first structures to come up in BKC, Mumbai," he added.

ABOUT THE AUTHOR

Gopika Gopakumar

Gopika Gopakumar has worked for over 15 years as a banking journalist across print and television media. Her expertise lies in breaking big corporate stories and producing news based TV shows. She was part of the 2013 IMF Journalism Fellowship Program where she covered the Annual & Spring meetings of the International Monetary Fund in Washington D.C. She started her career with CNBC-TV18, where she also produced a news feature show called Indianomics and an award winning show on business stories from South India called Up South. She joined Mint in 2016.
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