IL&FS Financial Services gross NPA at 90%: Uday Kotak

Reuters MUMBAI | Updated on April 04, 2019

IFIN has a total exposure of Rs 18,800 crore, out of which Rs 10,700 crore is to external agencies.   -  Getty Images/iStockphoto

The flagship lending unit of Infrastructure Leasing & Financial Services Ltd (IL&FS) has seen 90 per cent of its loans go sour, a company executive said on Wednesday, as the current management tries to recover dues from external agencies to pay its debt.

IL&FS Financial Services Ltd, commonly called IFIN, has seen its share of bad loans shoot up to 90 per cent as of December 2018 from 5 per cent in March 2018, said Uday Kotak, non-executive chairman of the company. 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 series 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. To stem the malaise, the government, through a court-led process in October, replaced the management with a team led by Asias richest banker Uday Kotak. “I have heard double digits NPA but 90 per cent GNPAs (gross NPA) are very unusual by any standards. That's the challenge that we have faced,” said Kotak, who is the chairman of Kotak Mahindra Bank.

Banks are struggling 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 started 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, N Sivaraman, chief operating officer of IL&FS Group said. Grant Thornton, 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 pay off creditors. “I think we 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,” Kotak said. “We are not trying to hoodwink anybody. We also know that whatever comes will not go to the shareholders but to the creditors sitting on the other side,” he said.

Published on April 04, 2019

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