Mumbai: The Reserve Bank of India (RBI) is ready to work with the new board of IL&FS and lend it the assistance it needs, RBI governor Urjit Patel said on Friday.
Patel lauded the efforts of the government in swiftly superseding the erstwhile board to address concerns and said the well-structured institutional measures have been timely and appropriate.
“These have helped to stabilize the situation. The Reserve Bank of India will engage with the new management, if necessary on assistance in its efforts going forward,” said Patel. After taking control of IL&FS last Monday, the government said that it noted corporate deficiencies, misrepresentation of the lender’s financial fragility and loss of credibility by its former management.
It added that a report by the Mumbai regional director of the corporate affairs ministry “clearly brought out serious corporate-related deficiencies in the IL&FS holding company and its subsidiaries”.
This is the second major company where the government has had to take control to salvage the situation in the last decade after Satyam Computer Services in 2009.
The government had also said that the consolidated financial statement of IL&FS holding company and its arms and joint ventures “projected a picture through highly exaggerated depiction of non-current assets in the form of intangible assets amounting to over ₹20,000 crore”.
The government superseded the IL&FS board under section 241(2) of the New Companies Act, 2013. This section enables supersession of a company’s board to prevent it from further mismanagement and to protect public interest.
The new board comprises six directors—Uday Kotak, managing director of Kotak Mahindra Bank; G.N. Bajpai, former chairman of the Securities and Exchange Board of India; G.C. Chaturvedi, chairman of ICICI Bank Ltd; and former bureaucrats Vineet Nayyar (also a former vice-chairman of Tech Mahindra), Malini Shankar and Nand Kishore. After its first meeting on 4 October, Uday Kotak, chairman of the board described IL&FS as an extremely complex corporate with 348 entities that are part of the group—far higher than the initial estimate of 169 subsidiaries.
Kotak added that the legal challenges are numerous, the debt is significant but that the board was committed to “complying with the law” in all resolutions while also finding commercial justification. The board is to submit its roadmap to the National Company Law Tribunal by 31 October. “We have a sense broadly of what directions and options we need to go in,” Kotak said.