IL&FS mess is deeper, darker; needs Rs 100 crore/month just to stay afloat

The new board of IL&FS has informed the government that the infra financier needs Rs 100 crore a month just to stay afloat. The board at the same time is working on overhauling the company expenses, which includes big cuts in the wage bill and possible layoffs, official sources said.

“For the group to be afloat, we need to fulfil working capital needs as well as the contractual and repayment obligations. Rs 100 crore per month (is required) just to stay afloat, excluding repayment,” the official said.

Ahead of the second board meeting on October 12, IL&FS board chairman Uday Kotak met Injeti Srinivas, secretary in the ministry of corporate affairs (MCA), on Wednesday to give him a first-hand assessment of IL&FS and to apprise the government of the steps being taken.

While the first priority is to remain afloat, cost rationalisation could also happen, which may imply job losses. “For expenditure cuts, the government will have to take tough decisions,” the official said, hinting at possible layoffs.
“We are consulting the government and making progress on IL&FS,” Kotak said. The Serious Fraud Investigation Office (SFIO) is also investigating the company’s business after serious complaints on some of its companies surfaced. While the government has called this a case of ‘misrepresentation of facts,’ an official said ‘a fraud cannot be ruled out.’

The board will honour all contractual obligations in critical projects and IL&FS has reached out to all customers and creditors like NHAI, and the settlement with NHAI funds may act as a template for settlement for other dues, said the official.

With regard to repayments, there could, however, be a ‘temporary reprieve,’ the official said, adding that the board will also have to honour its contractual commitments in critical projects, including that of National Highway Authority of India (NHAI).

Fraud can be ascertained after the SFIO submits its investigation report to the government in a month’s time, he added.