'No question of government bailout for IL&FS'

IL&FS Transportation Networks | The company defaulted on the interest on non-convertible debentures due on August 25, 2020. (Image: Reuters)

There is no plan to offer government a ‘bail out’ to cash-strapped Infrastructure Leasing & Financial Services (IL&FS), a top government official told Moneycontrol, dismissing speculation that the group’s newly constituted board is likely to ask the Centre for a rescue programme.

“The government will not infuse fund in to IL&FS. However, the government is there to give any other kind of support to the company, wherever required,” the official said today.

The government is fast tracking the dues of National Highways Authority of India (NHAI) towards IL&FS and will ensure that there is a fair dispute settlement mechanism with state governments and as well as the state-owned authority that develops and maintains highways.

“The process will begin as early as 60 days,” the official said.

The government is looking to settle claims raised by IL&FS against NHAI without going through arbitration process.

However, according to reports, the infrastructure lending major has arbitration claims worth Rs 70,000 crore with NHAI.

In addition, the Ministry of Corporate Affairs is working on a ‘well defined settlement framework’, along with a roadmap and will present it to the companies’ tribunal in its next hearing on October 31.

MCA has filed for a moratorium of up to three months at the National Company Law Tribunal (NCLT) so that the debt-laden company is ring fenced from creditors and from further legal and regulatory proceedings.

NCLAT has also asked the five largest lenders to IL&FS to respond on the government's request for a moratorium. The next hearing on the matter has been fixed for November 13.

According to the government, IL&FS Group, has infrastructure and financial assets exceeding Rs 1.15 lakh crore and is struggling to service around Rs 91,000 crore in debt, led by mismanaged borrowings in the past.

Moneycontrol had earlier during the day reported that the rights issue of IL&FS is likely to be pushed to March next year and that the immediate priority of the new board is to look at the sale of core assets to raise money.

From October 5-19, Rs 4,500 crore issue was on offer by IL&FS, as per an exchange notification. However, the issue did not take off.

While large institutional investors like Life Insurance Corporation of India (LIC) are ready to infuse capital into the group, they are waiting for asset sales in the next 2-3 months so that the short term cash crunch can be managed effectively.

On October 1, the National Company Law Tribunal (NCLT) approved the takeover of IL&FS board by government nominees, saying mismanagement at the crisis-ridden financier makes it a fit case of supersession of the board under Article 241 of the Companies Act.

The decision to supersede the existing board was taken after the ministry of corporate affairs’ (MCA’s) Regional Director, Mumbai submitted a report from that brought out serious ‘corporate related deficiencies’ in the IL&FS holding company and its subsidiaries. The board was suspended and a new six-member board led by Uday Kotak was constituted.