Infrastructure Leasing & Financial Services Ltd. is missing more debt obligations, even as the Indian government pledged to prevent further defaults, underscoring the challenges its new board faces in fixing the firm’s mounting debt problems.
IL&FS failed to service principal and interest on loans from banks, inter-corporate deposit and commercial papers totaling 339 million rupees ($4.6 million) due for the period from Sept. 30 to Oct. 4, it said in an exchange filing. The government earlier this week seized control of the conglomerate, which has total debt of $12.6 billion, ousting the erstwhile board of directors.
“This amount is peanuts in the big picture, that’s how bad the situation is at the group,” said Rajiv Kochhar, chief executive officer of Avista Advisory Partners in Singapore. “There is a huge mismatch in cash flows and people now have to manage their expectations in terms of the recovery prospect.”
The newly-constituted board of directors for the troubled Indian lender met Thursday and undertook an initial assessment of the firm. They face an uphill task in restoring confidence in the group, whose downfall has led to a selloff in equities and bonds. IL&FS’s default has also prompted risks of an investor stampede out of mutual funds that hold its securities. Getting fresh cash infusions would be crucial for the group that’s defaulted on its obligations since June, prompting rating cuts to junk.
The new board at IL&FS has been tasked with preparing a plan for the group and filing a response with the National Company Law Tribunal, the nation’s insolvency court, by Oct. 15.