The new board of Infrastructure Leasing & Financial Services (IL&FS) will likely seek at least 3-5 more months from the National Company Law Tribunal (NCLT) to submit a concrete resolution plan.
"The board does not have enough time and there is nothing concrete as a plan that can be submitted. The board will ask for a few more months, say about three to five months, to submit a specific plan. For now it will be kept open-ended," a source told Moneycontrol.
The board reportedly still has some due diligence to do and cannot draw a plan before it is done. "It is a short period and it needs to be seen how much time the National Company Law Tribunal (NCLT) gives the new board," the source said.
In a response to an email sent to the IL&FS Group's communications team, the company said it would not make any comment about the board’s plan.
The government-appointed board, led by Kotak Mahindra Bank chief Uday Kotak, has to submit a resolution plan for IL&FS to the NCLT on October 31.
IL&FS debt issues
The series of defaults by IL&FS and its group companies between August and early September cast a shadow over the entire non-banking finance sector.
On October 1, the government, which is a quasi-owner of IL&FS, forced out the previous board after it argued before the NCLT that the company's management presented a rosy picture when all was not well.
The tribunal had approved the government's supersession of IL&FS' board, accepting that the move was necessary in order to protect the financial markets.
In a press interaction after its first meeting on October 4, the new board said that the group actually had 348 subsidiaries, more than twice the 169 the company had disclosed earlier.
The IL&FS board is now considering several options, including selling stake in the company and its subsidiaries to a financially strong investor.
"All options including selling of subsidiaries, selling of select assets or operating units. However, not many buyers have come forward yet. We will wait for more clarity," the above-mentioned source said.
IL&FS' total debt stood at Rs 91,091.30 crore as on March 31, 2018, and the liabilities could increase further, according to the company's new board.
Also Read: IL&FS is a 'complex maze': Will public money come to the rescue yet again?
Investigation
The Serious Fraud Investigation Office (SFIO) has already started an investigation into the company's operations.
Sources told Moneycontrol that the Ministry of Corporate Affairs (MCA) believes the SFIO should examine if nominee directors of IL&FS adhered to their fiduciary duty and informed the companies they represented about mismanagement at IL&FS.
The first sign of trouble came in July, when founder Ravi Parthasarathy stepped down as the Chairman and Managing Director of the company, citing health reasons.
Debt and default
The biggest reason for why IL&FS and its group companies defaulted is the fact that most of the company's assets are long-term and illiquid in nature.
In the recent past, the company funded these projects through short-term borrowings, despite a lot of its receivables being long-term in nature, or stuck due to delays or stalled.
This led to a cash-crunch situation wherein IL&FS and some of its subsidiaries, including the listed ones, were unable to repay their short-term loans.
The government has taken the initiative to remedy this shortage of cash, which has had a rippling effect on the credit market, especially on non-banking financial companies.
IL&FS' shareholders include Life Insurance Corporation (LIC), State Bank of India (SBI) and Housing Development Finance Corporation (HDFC). Japan’s Orix Corporation is the company's second-largest shareholder.
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