New Delhi: IL&FS Group Chairman Uday Kotak at the new board’s first Annual General Meeting (AGM) on Tuesday said the ongoing resolution process of the debt-ridden group is a “test case” for group-wide resolution of stressed assets in the country.
Addressing the 32nd AGM of the group, Kotak said the absence of requisite legal framework for group resolution under Insolvency and Bankruptcy Code (IBC) required the new board to propose the ‘first-of-its-kind” resolution framework that balanced interest of stakeholders across classes and levels, while keeping broad principles of corporate finance in mind.
Resolution, restructuring and recovery formed the three vital pillars of the strategy adopted by the new board, he said.
In October last year, the government had removed the sitting board members and installed a new board headed by Uday Kotak after the group defaulted on its loans.
“The combination of complex group structure comprising financial services, infrastructure and other businesses, high level of debt and diverse nature and type of creditors at various levels of the group represent a very unique scenario which is far removed from other well-known cases of distressed Indian companies in the recent past,” said Uday Kotak, Chairman, IL&FS Ltd.
Kotak said the board expects to recover 50 per cent of the overall outstanding debt in its books as on September 30, 2018. The crisis-ridden group has total outstanding debt of over Rs 90,000 crore.
He said that the board is committed to completing the resolution process at the earliest and is working towards addressing “significant” portion of addressable debt by July 2020.
During the AGM, it was also announced that the government of Gujarat has approved the purchase IL&FS Group’s stake in Gujarat International Finance Tec-City Company Ltd. (GIFTCL), whereby a state government entity would buy the 50 per cent state of IL&FS, resolving debt of approximately Rs 1,200 crore.
Outlining some of the major developments in the resolution process, Kotak noted that IL&FS Group’s stake in seven wind power SPVs has been sold for nearly Rs 4,300 crore covering 100 per cent of entity-level debt and including equity value of nearly Rs 590 crore.
The group has a cash reserve of Rs 6,500 crore as on November 30, 2019, with nearly 87 per cent of these funds parked in instruments such as fixed deposits and money market mutual funds, he said.
The banking tycoon, who also heads the Kotak Mahindra Bank, said that sale of other assets of IL&FS Group in energy, transportation, waste management, technology, water, urban infrastructure verticals are currently underway. The group has also received binding bids for 10 road assets. Five assets with combined financial debt of Rs 9,500 crore have been referred to respective creditor committees for next steps.
An Infrastructure Investment Trust (InvIT) is being set up for nine road assets with total financial debt of more than Rs 11,000 crore, he noted.