IL&FS mess! Lenders hopeful of recovery but fear 10-15% haircut
Among the public sector banks, Bank of India has the highest exposure of Rs 2,388 crore. The debt-laden company also owes Rs 1841 crore to Yes Bank, the maximum among private lenders.
- Oct 3, 2018,
- Updated Oct 3, 2018 2:43 PM IST
After the sacking of the 15-member board of IL&FS and the appointment of Kotak Mahindra Bank Managing Director Uday Kotak as Non-Executive Chairman, lenders are hopeful of recovering the money the company owes to them. However, buyers could bargain hard to bring down the cost they would bear, which means these banks could take 10-15 per cent haircut on loans.
Among the public sector banks, Bank of India has the highest exposure of Rs 2,388 crore. The debt-laden company also owes Rs 1841 crore to Yes Bank, the maximum among private lenders.
The company needs an immediate capital infusion but the lenders are demanding a comprehensive revival plan as the IL&FS recently sought the additional loans of Rs 3,500 crore from these banks. The banks have a collective exposure of over 62% (Rs 34,400 crore) of the Rs 91,000-crore debt to the beleaguered company. IL&FS also owes Rs 2140 crore to the State Bank of India and Rs 1859 crore to the Punjab National Bank.
After sacking the 15-member board of IL&FS, the Serious Fraud Investigation Office (SFIO) has begun its investigation to find out any financial irregularity but experts say banks are bound to lose some of their money.
"These loans will have to be restructured and there will be an asset monetisation process which means there is likely to be a delay in some payments. Then you have to also consider the mark to market losses on these loans. It is fair to assume some haircuts for lenders in the short term," the Economic Times quoted Abizer Diwanji, Partner, Financial Services at EY, as saying.
Experts believe the IL&FS case should be a wakeup call for the government precisely for the reason that it reached a stage of collapse without anyone spotting the problem early on.
Meanwhile, the new board has been directed to hold its first meeting on October 8 this year, and to submit a report on its finding and a roadmap before the bench by October 31, the next date of hearing. Debt defaults by certain group entities of diversified IL&FS have triggered fears of liquidity crisis in the financial markets and the RBI has been taking steps to improve the overall cash situation.
Edited by Manoj Sharma
After the sacking of the 15-member board of IL&FS and the appointment of Kotak Mahindra Bank Managing Director Uday Kotak as Non-Executive Chairman, lenders are hopeful of recovering the money the company owes to them. However, buyers could bargain hard to bring down the cost they would bear, which means these banks could take 10-15 per cent haircut on loans.
Among the public sector banks, Bank of India has the highest exposure of Rs 2,388 crore. The debt-laden company also owes Rs 1841 crore to Yes Bank, the maximum among private lenders.
The company needs an immediate capital infusion but the lenders are demanding a comprehensive revival plan as the IL&FS recently sought the additional loans of Rs 3,500 crore from these banks. The banks have a collective exposure of over 62% (Rs 34,400 crore) of the Rs 91,000-crore debt to the beleaguered company. IL&FS also owes Rs 2140 crore to the State Bank of India and Rs 1859 crore to the Punjab National Bank.
After sacking the 15-member board of IL&FS, the Serious Fraud Investigation Office (SFIO) has begun its investigation to find out any financial irregularity but experts say banks are bound to lose some of their money.
"These loans will have to be restructured and there will be an asset monetisation process which means there is likely to be a delay in some payments. Then you have to also consider the mark to market losses on these loans. It is fair to assume some haircuts for lenders in the short term," the Economic Times quoted Abizer Diwanji, Partner, Financial Services at EY, as saying.
Experts believe the IL&FS case should be a wakeup call for the government precisely for the reason that it reached a stage of collapse without anyone spotting the problem early on.
Meanwhile, the new board has been directed to hold its first meeting on October 8 this year, and to submit a report on its finding and a roadmap before the bench by October 31, the next date of hearing. Debt defaults by certain group entities of diversified IL&FS have triggered fears of liquidity crisis in the financial markets and the RBI has been taking steps to improve the overall cash situation.
Edited by Manoj Sharma