NEW DELHI: The Infrastructure Leasing & Financial Services Limited (IL&FS) group is faced with a debt of Rs 91,000 crore and is suffering a severe liquidity crunch. Of this Rs 91,000 crore, the flagship IL&FS itself has a debt of nearly Rs 35,000 crore while IL&FS Financial Services owes Rs 17,000 crore.
On Monday it defaulted on interest payments on commercial papers for the third time this month. Earlier this month, it was found that the IL&FS group had defaulted on a short-term loan of Rs 1,000 crore from Small Industries Development Bank of India (Sidbi) and a subsidiary has defaulted on Rs 500 crore dues.
As a result, Sidbi has filed an insolvency application against IL&FS with the the National Company Law Tribunal (NCLT), according to Bloomberg. IL&FS has not been able to pay Rs 490 crore so far this year and is due to pay an additional Rs 220 crore by October-end. In the next six months, it needs to pay as much as Rs 3,600 crore.
IL&FS is exposed to state-owned entities in a big way, putting a huge amount of public money at risk. Life Insurance Corporation of India (LIC) is the group's biggest shareholder, with State Bank of India (SBI) and Central Bank of India too having significant stakes.
On Tuesday LIC assured that it will not allow IL&FS to collapse and explore options to revive it. "We will ensure IL&FS does not collapse. We will not allow contagion to spread from IL&FS.... All options are open (including raising stake in the company)," said LIC Chairman V K Sharma after a meeting at the Ministry of Finance (MoF).
Shares of IL&FS group companies surged by up to 12 per cent Tuesday after Sharma's statement. The scrip of IL&FS Engineering and Construction Company soared 12.02 per cent and IL&FS Transportation Networks jumped 5.74 per cent on BSE. Shares of IL&FS Investment Managers, however, ended marginally down 0.13 per cent.
Meanwhile, the finance ministry has maintained that IL&FS Group is independent of the government and the company needs to resolve its issues. "IL&FS is independent of the government. It has independent board and shareholders. So, IL&FS needs to resolve its issues on its own and I think it is capable of doing it," said Economic Affairs Secretary Subhash Chandra Garg.