Infrastructure Leasing & Financial Services (IL&FS) has reportedly defaulted on a short-term loan worth hundreds of crores from Small Industries Development Bank of India (SIDBI). Since this was termed as bad debt or non-performing asset (NPA), SIDBI has reportedly asked one of its senior officials to resign owning responsibility for the default.
According to our sources, IL&FS has defaulted in repaying a short-term loan of Rs1,000 crore to SIDBI. At the same time, a subsidiary of IL&FS too has defaulted in repaying loan worth about Rs500 crore to the development financial institution.
As an immediate measure, SIDBI has asked Swaminathan Mallikarjun, its chief general manager in the risk management department, to resign for the bad debt from IL&FS.
Defaulting on short-term loan commitment that too from an infrastructure development and finance company with pan-India presence, is very serious issue. Nothing of this sort has happened before, our source says.
SIDBI's chairman and managing director, Mohammad Mustafa, is from the Indian Administrative Services (IAS) cadre and would like to take strict action in this matter. However, since SIDBI does not really have any security to invoke in its loan to IL&FS and the bankruptcy code as stated in the IBC does not apply to non-banking financial companies (NBFCs), our sources say.
We sent a message to Hari Shakaran, vice chairman of IL&FS seeking his comment on these developments. We will update this article as and when we receive response from him.
Senior officials from SIDBI were not immediately available for comment. We will update this story as and when we receive their feedback.
Separately, ratings agency ICRA has downgraded to 'D' from 'C' bank debt of Rapid Metrorail Gurgaon South Ltd (RMGSL) for not making interest payment for August 2018 on time. RMGSL is a special purpose vehicle (SPV) sponsored by IL&FS Rail Ltd (IRL) with 65.0% stake and IL&FS Transportation Networks Ltd (ITNL) with balance stake.
"The revision of RMGSL's rating takes into account the recent irregularities in debt servicing by the company. RMGSL has not paid the interest for the month of August 2018. The company's inability to generate sufficient revenues due to continued weak ridership on the project route had made it highly dependent on timely funding support from promoters. However, the promoter has not made available the required funds. As per the RMGSL's management, the company has represented to Haryana Urban Development Authority (HUDA) for claims due to breach of provisions of the Concession Agreement," ICRA has said.
Total cost of the project was funded by a combination of debt of Rs1,500 crore and equity. The entire term loan of Rs1,500 crore has been sanctioned by a consortium of five banks with Canara Bank as the lead bank and an external commercial borrowing (ECB) loan lender. The project achieved commercial operations on 31 March 2017.