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IL&FS board initiates austerity measures to tackle crisis

IL&FS board initiates austerity measures to tackle crisis

IL&FS board initiates austerity measures to tackle crisis
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By Timsy Jaipuria  Oct 15, 2018 6:50:13 AM IST (Updated)

As the government plans to resurrect the beleaguered Infrastructure Leasing & Financial Services (IL&FS), its newly-appointed board has made “considerable progress on resolving the crisis,” said a source familiar with the matter. Since its appointment on October 1, the new board has been trying to understand the magnitude of the liquidity crisis in IL&FS and other threats that the conglomerate is facing.

As the government plans to resurrect the beleaguered Infrastructure Leasing & Financial Services (IL&FS), its newly-appointed board has made “considerable progress on resolving the crisis,” said a source familiar with the matter.

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The government on Friday approached the National Company Law Tribunal (NCLT) in Mumbai seeking a three-month moratorium for the new IL&FS board from creditors.
Though the court has kept its order reserved, the source said, “The government is quite confident that the moratorium will be granted.”
One of the key challenges that the company is facing includes deploying of limited cash flow, a source privy to the matter told CNBC-TV18.
The IL&FS board on Friday said they had begun cutting cost in staffing and unspecified operations as the first step in their efforts to revive the company.
Since its appointment on October 1, the new board has been trying to understand the magnitude of the liquidity crisis in IL&FS and other threats that the conglomerate is facing.
On October 1, the government superseded IL&FS board and appointed a new six-member board with Uday Kotak as the non-executive chairman.
IL&FS said in a statement that its new board had also approved the formation of an operating committee under vice chairman and managing director Vineet Nayyar and "had detailed deliberations in relation to the roadmap ahead".
The infra major said the new board will also conduct a full audit of the standalone and consolidated accounts up to September 30, 2018, adding that it had replaced the nominee directors of IL&FS at its subsidiaries and nominated new ones from the board.
The government is pinning hopes on the proposal cleared by the board to undergo austerity measures, a major part of which will be to fold back from global operations where the company is not under any contractual obligation.
“There are a lot of offices of the company abroad which are not busy or overlooking any contractual obligation, thus the idea will be to fold back from those countries,” the source added.
The board is also looking at rationalisation when it comes to the utilisation of funds at the company, and the government is helping the new board with the settlement of claims with public sector undertakings (PSU) and National Highways Authority of India (NHAI).
The board is trying to settle claims, especially with the NHAI. “The board chairman Uday Kotak met the union road transport and highways minister Nitin Gadkari. The idea of the government is to go in for a well-defined dispute settlement framework for speeding up IL&FS claims,” the source said.
In the case of incompleted projects, the government is also exploring an option where either NHAI may acquire those projects, retain the entire projects or invite bids for remaining work.
Earlier, the new board of IL&FS had reached out to NHAI for settlement of claims, as payment of dues from the highways authority would provide immediate relief to the company. IL&FS has made Rs 70,000 crore worth of arbitration claim against the NHAI, which are under various stages of resolution.
Majority of IL&FS projects are government projects and that could be one of the reasons that the centre decided to step in to rescue the company from the crisis.
“New board of IL&FS is likely to chalk up revival plan soon and present it in front of NCLT, when it meets next on October 31,” the source said.
“Valuation of incompleted projects to be done by NHAI and an independent agency after that government may consider appointing a high-level panel of secretaries to address the arbitration to push for a faster resolution and out of court settlement," added the source.
With inputs from Reuters.
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