Moneycontrol News
Infrastructure finance and leasing firm IL&FS is said to have defaulted further on unsecured loans worth Rs 150 crore to Small Industries Development Bank of India (SIDBI). According to a BloombergQuint report, the total default on inter-corporate deposits by IL&FS to SIDBI has now risen to Rs 450 crore.
The report said that SIDBI has inter-corporate deposits worth Rs 500 crore with IL&FS. Further, another Rs 500 crore deposits from SIDBI is parked with IL&FS Financial Services Ltd, which is the non-banking financial company (NBFC) arm of IL&FS. These deposits are due in November. This is the second such case in the last few weeks where IL&FS has defaulted on a payment.
Unlike a secured loan, an unsecured loan is issued on the basis of the creditworthiness of the borrower and does not require any collateral. An Inter-Corporate Deposit (ICD) is a type of unsecured loan. This loan is taken by corporates and financial institutions from other corporate entities that have surplus funds. It is a source of short-term funds.
IL&FS is facing a special audit by the banking regulator after it failed to repay unsecured loans worth Rs 350 crore to SIDBI.
Also read: HDFC refuses to give loans to IL&FS
The default was followed by a ratings downgrade by rating agencies ICRA and CARE.
ICRA and CARE downgraded non-convertible debentures of IL&FS to BB from AA+. ICRA said the downgrade reflects ‘rising pressure on liquidity at the group level due to sizeable repayment obligations’.
ICRA also downgraded the short-term rating for a Rs 40 billion commercial paper programme of IL&FS Financial Services, a subsidiary of IL&FS, to 'A4' from 'A1+'.
Crucial board meet today
IL&FS board which has Life Insurance Corporation of India (LIC) managing director Hemant Bhargava as chairman will meet today to discuss a Rs 3,000 crore funding proposals. Moneycontrol had reported earlier that LIC will offer upto Rs 800 crore to pull the group out of the cash crisis. But this will be subject to IL&FS presenting a clear vision of debt reduction and sale of non-core assets.
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