Uday Kotak, non-executive chairman of the newly constituted board for infrastructure lender IL&FS. Photo: AFP

The crisis afflicting Infrastructure Leasing & Financial Services (IL&FS) – an infrastructure conglomerate and group companies – is expected to take a toll on retirement benefits for middle-class citizens.

The pension and provident funds for thousands of salaried workers are in danger as they have investments of up to 200 billion rupees in IL&FS.

The funds either purchased bonds or lent money to the troubled infrastructure lender when it was enjoyed a high credit rating, Economic Times reports.

According to regulatory filings by IL&FS, it has a debt of 910 billion rupees (US$12.8 billion), 61% of which is the form of bank loans and 33% as debentures and commercial paper.

A moratorium granted by the National Company Law Tribunal on payments by IL&FS to creditors has thrown the market into disarray. While there is little resolution in sight, even some of the companies generating cash have stalled payments to lenders.

Tunnel project hit

IL&FS has also surrendered the 68-billion-rupee ($956 million) contract it bagged in 2017 to build a tunnel in the northern state of Jammu and Kashmir. The 14-kilometer Zojila tunnel project was expected to provide all-weather connectivity from state capital Srinagar to Kargil and Leh. These areas (Kargil and Leh) experience extreme winters and remain snowbound for many months.

The Indian government will now invite fresh tenders for this project and bids will be called before dates for the upcoming general election are announced.

IL&FS has played a major role in Indian infrastructure development and financing since it was incorporated in 1987. The group has 169 companies, including subsidiaries, joint ventures and associated entities.

Last year IL&FS defaulted on some of its debt obligations and in October there were concerns that it might lead to the collapse of the country’s financial system and markets.

After getting approval from the Insolvency and Bankruptcy Court the government took control of the IL&FS board and appointed well-known banker Uday Kotak and five others to get the company out of the red.

The new board is looking to hive off and sell entire business segments to willing buyers or if that fails, seek asset-level resolution.

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