Mother Dairy Fruit and Vegetable Private Ltd (MDFVL), the wholly owned subsidiary of National Dairy Development Board, is one of the investors left in the lurch over the mess at the beleaguered Infrastructure Leasing and Financial Services Ltd (IL&FS). In fact, the company had invested Rs 190.84 crore in inter-corporate deposits of IL&FS in a series of six transactions over August 20-28 last year, The Indian Express reported.
The time of this investment overlaps with the time the infrastructure lending company started defaulting on its commercial papers and loan repayments and the soon-to-snowball crisis came to light. According to reports, by mid-September it had failed to repay about Rs 350 crore worth of unsecured loans to SIDBI in a series of defaults starting on August 27, while the next day IL&FS' financial arm defaulted on repaying to its commercial-paper investors.
Previously, in June 2018, another IL&FS subsidiary IL&FS Transportation Networks (ITNL) had declared a payment default, prompting ratings agencies to downgrade its commercial paper and credit facilities. MDFVL's investment in IL&FS, therefore, came at a time when IL&FS' woes were just beginning to show, and it was already scrambling to sell assets to raise funds to avoid further defaults.
Now MDFVL is hoping for government intervention to recover its investment of over Rs 190 crore. The company's CEO Sanjeev Khanna reportedly wrote to Prime Minister Narendra Modi in February to apprise him of the situation, adding that the IL&FS default has "weakened" MDFVL's ability to pay farmers dependent on it.
"Farmers are dependent upon MDFVL for their livelihood as the amount invested in IL&FS was payable to farmers as the initial investment was made for a short duration (8-16 days maturity period). The failure on part of IL&FS to pay the amount has resulted in severe cash crunch for MDFVL and it is struggling to pay the farmers and keep the supply chain of agricultural products running," read the letter requesting the PM to "kindly intervene in this matter".
Meanwhile, the Serious Fraud Investigation Office (SFIO) arrested IL&FS' former chairman Hari Sankaran on April 1 in connection with the ongoing investigations into the affairs of the Group. IL&FS is sitting on a debt pile of about Rs 91,000 crore. Separately, the National Company Law Appellate Tribunal (NCLAT) on Friday asked the government and the IL&FS board to provide financial details, including amounts payable to creditors, of 13 group entities. The next hearing is scheduled for April 8.
Under its resolution plan, the government has categorised IL&FS group entities into green, amber and red categories based on their respective financial positions. Entities classified as 'green' would continue to meet their payment obligations, while 'amber' category firms can meet only operational payment obligations to senior secured financial creditors. Those falling in the 'red' category are the entities which cannot meet their payment obligations towards even senior secured financial creditors.
Edited by Sushmita Choudhury Agarwal with PTI inputs