22 May 2019: The government expects to recover up to Rs 50,000 crore from the sale of entities belonging to Infrastructure Leasing & Financial Services (IL&FS) group and pay back its lenders, a person close to the development said. The beleaguered firm has an estimated debt of over Rs 94,000 crore.
“The current Board is likely to recover about Rs 50,000 crore from sale of assets. Anything above that would be an extraordinary performance,” said the person.
The asset level resolution and sale of business verticals comprising a basket of companies and other entities is the most feasible option for the resolution of the company’s debt, as per the affidavit submitted by Ministry of Corporate Affairs (MCA) in the National Company Law Appellate Tribunal (NCLAT) on Tuesday.
“The asset sale is on track. The debt of around Rs 11,600 crore is likely to be recovered from the sale of 55 green companies. It is likely to become Rs 20,000 crore with more companies joining the green category soon. So, green is totally out of woods. We will get a positive return from them. We are likely to recover Rs 20,000 crore from the amber category of companies. The bids will now open. By mid-August, the bulk of the work should be done, mostly in the firms under green and amber category,” said a source close to the development.
“As far as companies in red category are concerned, half of them are hollow. We don’t hope to get anything out of them. A few thousand crores may, however, come from foreign assets,” the source said.
As part of the resolution plan, the group companies, based on their financial position, have been classified into three categories – green, amber and red. The Board of IL&FS group is running the company to ensure settlement after it was superseded by the government-appointed new Board in October.
Five more companies have been added to the green category, taking the tally to 55, while two companies have been added in the red category, increasing their number to 82, as per the affidavit. Of the total over 300 subsidiaries, 11 are yet to be classified.
The new companies in the green category are Gujarat International Finance Tec-City Company, Mangalore SEZ Ltd, New Tirupur Area Development Corporation, ONGC Tripura Power Company and Canopy Housing & Infrastructure. The two companies classified under the red category are the Jharkhand Infrastructure Development Corporation and Orissa Project Development Company.
Meanwhile, the sale of 10 companies under the green category is underway. The total debt of these 10 companies stands at Rs 11,564 crore. It is nearly 99% of the debt of all green companies, the MCA said in the affidavit.
A large part of the sale is likely to be concluded by mid-August, people close to the development said.
IL&FS group also has assets in other countries, mainly China and Dubai. The Board is likely to soon review the status of the international assets of the group to see how to dispose off the group’s international assets.
According to the people privy to the development, shareholders of IL&FS group companies having positive equity are also likely to get something in return for their equity stake as the Board looks to recover up to Rs 50,000 crore from sale of assets.
“We may work out some proposal where investors will also be given money. We are looking at it with an open mind. We may earmark a particular amount like 85% and 15% of the total kitty to secured and unsecured creditors, respectively,” they said, adding that unsecured creditors include pension funds and mutual funds.
The Board also plans to go after debtors to recover dues. “Unitech, Parsvnath and Reid & Taylor are some of the companies which owe money to some IL&FS firms. We will not spare anyone. If need be we will take them to National Company Law Tribunal (NCLT). A month back we had given them some time. Now it’s time to decide whether to take them to the court or not. We now have to review the matter,” the source said.
While the Board is trying to adhere to the 270 days’ deadline for resolution process at NCLT, it is not bound by it. “We can’t adhere to the deadline in case of companies such as IL&FS Financial Services (IFIN). This may lead to distress sale,” he further said, adding that IL&FS group is likely to continue for one or two years till all the saleable assets are disposed of.
A WIDE GULF TO BRIDGE
- Rs 94,000 crore – Estimated debt of IL&FS group
- Rs 11,564 crore – Total debt of 10 companies which have good financial position