The flagship lending unit of Infrastructure Leasing & Financial Services Ltd (IL&FS) has 90 per cent of non-performing loans, a company executive said on Wednesday, as the current management tries to recover dues from external agencies to clear its debt.
Uday Kotak in a television interview said that IL&FS Financial Services Ltd, commonly called IFIN owns a bad set of loans which shot up to 90 per cent as of December 2018 from 5 per cent in March 2018. This has made it difficult to recover money from its receivables to pay off bankers and other financial institutions who have lent to other arms of the company.
A string of defaults in September at the major infrastructure developer and financier triggered widespread concern of a bad debt crisis lurking in India’s shadow banking sector. Futhermore, the government, through a court-led process in October, replaced the management with a team led by Asias richest banker Uday Kotak.
Banks are grappling with a record $150 billion of bad debt with the lion’s share held by state-run banks. Even so, the total non-performing assets of the state-run banks range from 10-20 per cent. IFIN has initiated its recovery process and will employ legal means or go through the bankruptcy route to recover money from clients, Kaushik Modak, executive director of IFIN said. He said the company has so far recovered Rs 831 crore since the process began six months back.
IFIN has a total exposure of Rs 18,800 crore, out of which Rs 10,700 crore is to external agencies while the remainder is with group companies, said the COO of IL&FS Group. Grant Thornton LLP, after an audit of IL&FS books, said last month that a third of IFIN’s total outstanding loans were either unsecured or had inadequate collateral.
IL&FS has a total debt of close to a Rs 1 trillion and the Kotak-led management has put several of its group companies up for sale to raise funds to clear debts. Kotak said it thinks they will be able to achieve this (resolution of IL&FS debt) in an accelerated manner in an environment of comfort with each other’s trust.
