The week ended on a troubling note for the crisis-stricken Infrastructure Leasing and Financial Services. Ramesh C Bawa, chief executive and managing director of IL&FS Financial Services', resigned with immediate effect on Friday. This happened on the same day that the company defaulted on payment obligations on IDBI Bank Letter of Credit due by Friday.
Along with Bawa, five directors have also decided to jump ship. Four independent directors, namely Renu Challu, Shhubhalakshmi Panse, Uday Ved and SS Kohli, and non-executive director Vibhav Kapoor have stepped down from the board of IL&FS Financial Services (IFIN). Now only Hari Sankaran and Arun K Saha remain on a board that has eight seats.
Now IFIN Executive Director Kaushik Modak is reportedly being considering for the position of CEO. He co-founded Swakarma Finance before starting his stint with IL&FS in June. Before that, he has worked as the CEO and country head of Rabobank India. Incidentally, IFIN was put up for sale three weeks ago, but no entity has stepped forth with an offer yet.
After the consecutive defaults by IL&FS, IFIN has been locked out of the commercial paper market till March 18, 2019 in accordance with Reserve Bank Commercial Paper (CP) Directions. Notably, the company could not honour commercial papers which were due on September 14, and later defaulted on repayments due on September 18. This, along with the declining IFIN of the subsidiary company, seems to have put off prospective buyers for the financial services company.
Along with the C-suite upheavals, financial troubles have also come for debt-laden IL&FS. The company has defaulted on payment obligations against a Letter of Credit by IDBI Bank which were supposed to be honoured by this Friday. The payment was originally supposed to made on September 20, but the deadline was shifted to September 21 since Thursday was a non-banking day. The company has defaulted on at least two payments to its bondholders since August. On September 4, it came to light that IL&FS defaulted on a short-term loan of Rs 1,000 crore from SIDBI, while a subsidiary has also defaulted Rs 500 crore dues to the development finance institution.
Earlier this week, Delhi High Court passed interim orders barring the company's road construction arm, IL&FS Transportaion Networks, from selling its assets in light of an arbitration application filed by Aditya Birla Finance Limited. The company is seeking legal advice to defend the court order.
"We hereby inform that the Aditya Birla Finance Limited, one of the creditors of the two project special purpose vehicles has filed an arbitration application under section 9 of the Indian Arbitration and Conciliation Act, 1996 before the Hon'ble High Court of Delhi. Pending constitution of the arbitral tribunal, the Delhi High Court has passed interim orders dated 18.09.2018, a copy of which was received today, inter alia, injuncting the Company from transferring or creating third party interest in their unencumbered assets till the next date of hearing fixed on 07.12.2018," IL&FS Transportation Networks said in a regulatory filing.
IL&FS has been sitting on a debt pile of around Rs 91,000 crore and had been downgraded to junk status by rating agencies following the default. Of this, Rs 57,000 crore are bank loans alone, most of which are from state-run lenders. While IL&FS has nearly Rs 35,000 crore consolidated debt, IL&FS Financial Services has Rs 17,000 crore of debt, which sits as standard asset for most of the lenders, according to a Nomura India report.