The newly constituted board of debt-laden IL&FS headed by Uday Kotak will submit an assessment plan in the next two weeks, a top official in the Ministry of Corporate Affairs said on October 1.
“The government will handhold the new board and has advised them to prepare a first-hand assessment of the situation. The first board meeting is likely to happen in the next two- three days,” the official said.
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A resolution plan is expected to follow after the new board submits the assessment report.
“We need to make a complete assessment of the financial position. There is a very big mismatch that needs to be assessed. The company has very high intangible assets, which may not yield revenue,” the official added.
Earlier during the day, the National Company Law Tribunal (NCLT) approved the takeover of IL&FS board by government nominees, saying mismanagement at the crisis-ridden financier makes it a fit case of supersession of the board under Article 241 of the Companies Act.
The decision to supercede the existing board was taken after MCA’s Regional Director, Mumbai submitted a report from that brought out serious ‘corporate related deficiencies’ in the IL&FS holding company and its subsidiaries.
A new six-member board led by veteran banker Uday Kotak will take charge of the company. The other members are former Securities and Exchange Board of India (SEBI) Chief GN Vajpai, ICICI Bank Chairman GC Chaturvedi, Tech Mahindra’s Vineet Nayyar, and former bureaucrats Malini Shankar and Nand Kishore.
Over the past one month, IL&FS has defaulted on payments and is sitting on total liabilities of Rs 91,000 crore. The crisis at IL&FS spilled over to bond and stock markets, with yields rising and stock prices tumbling.
According to an official statement from the finance ministry, the government noted that the consolidated financial statement of the IL&FS holding company and its subsidiaries exaggerated the value of their non-current assets by showing intangible assets worth over Rs. 20,000 crore.
The Serious Fraud Investigation Office (SFIO) will also investigate into the company’s business after serious complaints on some its companies surfaced.
Incorporated in 1987, IL&FS is a large Systemically Important Non-Deposit Accepting Core Investment Company (CIC-ND-SI) and has several infrastructure assets that played a major role in infrastructure development and financing in the country. It has 169 group companies, which includes subsidiaries, joint venture companies and associate entities.