At business vertical level, the resolution may include sale of specific verticals like roads, renewable, real estate, power
The new IL&FS Board submitted progress report and future plan to National Company Law Tribunal (NCLT) on Wednesday stating that the resolution could involve significant capital infusion, divestments and debt restructuring at IL&FS Group, business vertical or platform level and asset level.
The report was also submitted to the Ministry of Corporate Affairs (MCA).
"The primary and core problem for the IL&FS Group is excessive leverage, without commensurate asset values or cash flows, from the perspective of both timing and quantum. Thus, the New Board believes that the Final Resolution will inevitably involve substantial deleveraging from the current levels, notwithstanding the various challenges," the report said. Such deleveraging will necessarily need to be achieved in an orderly manner, considering the scale and complexity of IL&FS Group, in the absence of which there could be dire impact on asset/ company values, especially at the level of certain key verticals, it said.
Either individually or in a combination, a deleveraging exercise usually involves significant capital infusion either from the existing or new investors, asset monetisation to retire debt and resolution or compromise with the creditors. Hence, a combination of various options will be chosen to revive the stressed company, it said
At the IL&FS Group level, the resolution is likely to involve capital infusion. At the business vertical or platform level, the resolution may include sale of specific verticals like roads, renewable, real estate and thermal power. At the asset level, the resolution would involve "asset-by-asset solution".
"Majority of the loan liabilities exist at the operating asset level. However, this option may require liquidation of some businesses or assets that find no meaningful offers from buyers or are significantly unviable," it said.
The new Board will work towards the final resolution, in stages and parts over a period of six to nine months, and there is a possibility of some early partial resolutions in a timeframe of the next two to three months. However, the early resolutions would be only after NCLT's approval.
The newly nominated directors and joint financial and transaction advisors have already started receiving enquiries from domestic and global investors for various IL&FS Group assets. The Board has started considering these proposals for divestments.
On Wednesday, the division bench of NCLT at Mumbai directed Ministry of Corporate Affairs to submit an updated list of nominee directors of not only the group company, but also of all the 346 subsidiaries. Thus, a list of directors of all the 347 entities will have to be submitted to the NCLT in a fortnight.
Along with this, all the subsidiaries, joint ventures, associate companies, joint control operations, etc, too will have to become party to the ongoing litigation. "All the 346 subsidiaries are respondents and all of them should be made party. Every subsidiary is a different entity," division bench of NCLT said.
It was also brought to the notice of the court that during FY16, FY17 and FY18 IL&FS Financial Services had outstanding loans of amounts Rs 5,728 crore, Rs 5,127 crore and Rs 5,490 crore in excess of the permissible limit.
NCLT, Mumbai has fixed December 3 as the date of hearing.
Meanwhile, the rights issue approved by the previous IL&FS Board that was open during October 5-19 received a subscription of only Rs 5.47 lakh, and that too from few retail shareholders. No institutional shareholders showed interest. As a result, the new Board will now return the subscription money to those applied to the rights issue.
BRICK BY BRICK
- At the IL&FS Group level, the resolution is likely to involve capital infusion
- At business vertical level, the resolution may include sale of specific verticals like roads, renewable, real estate, power
- At the asset level, the resolution would involve "asset-by-asset solution"
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