The resolution process for Infrastructure Leasing & Financial Services (IL&FS) is likely to extend beyond the current financial year due to stalled key monetization proposals and disputes. The troubled infrastructure lender’s estimated resolution figures of Rs 61,000 crore may fall short without progress on proposed resolutions through InvITs (infrastructure investment trusts) and other monetization plans. Of the over 300 subsidiaries, 91 IL&FS entities remain unresolved, according to the latest status report filed with the National Company Law Appellate Tribunal (NCLAT).
The government-appointed board, led by non-executive chairman CS Rajan, anticipates completing resolutions for 67 companies by this financial year, while 24 companies are expected to spill over into the next financial year. The overall debt resolution across the group is estimated at approximately INR 61,000 crore, representing around 61.39% of the total external debt outstanding of Rs 99,355 crore.
IL&FS, a systematically important non-banking finance company, faced a crisis in 2018, prompting the government to appoint a board to navigate the complex resolution process. The entities were categorised into “red,” “amber,” and “green” based on their ability to meet payment obligations. IL&FS is classified as a “red” entity, signifying an inability to meet all obligations, including payments to senior secured financial creditors.
The vexed issue
While several amber and green entities have been resolved, several red entities remain unresolved. The resolution process faced challenges, including delays in approving debt restructuring, transfer to InvIT, and disputes with shareholders. The IL&FS group’s total debt discharged to creditors stands at Rs 34,977 crore as of September 30, 2023.
Despite ongoing challenges, IL&FS is working on various fronts to resolve outstanding issues, including the sale of assets, debt restructuring, and seeking approval from the NCLAT for specific concessions. The company is grappling with hurdles in the resolution of various entities, including delays in approvals, disputes with shareholders, and challenges in the sale of assets.
The NCLAT status report suggests the need for a continuation of the moratorium to curtail individual creditor actions and provide a calm period for the new board to complete the resolution process. Out of the total 302 companies, 169 are domestic, and 133 are offshore, with only a fraction of domestic companies fully resolved. The road ahead indicates potential challenges, with 24 entities expected to remain unresolved beyond March 31, 2024, due to complexities and delays in responses from joint-venture partners, litigations, and holding companies requiring resolution. Stakeholders are hopeful for a resolution before the sixth anniversary of IL&FS’s crisis.
