NEW DELHI: A day after the government superseded IL&FS board, former independent directors of the crisis-ridden group has written to new Chairman Uday Kotak extending their "complete support" in the revival of the entity.
Five former independent directors, including former Chairman SB Mathur, in a letter, have also mentioned about IL&FS being unable to raise additional equity despite several attempts and the "asset-liability" mismatch that continued to aggravate.
Other independent directors are RC Bhargava, Michael Pinto, Jaithirth Rao and Rina Kamath.
While assuring their "complete support", the independent directors said the government's action is the correct one as it enables reaching out to various counterparties, including debtors and creditors of IL&FS, from a position of strength and clarity.
"Despite several attempts during our tenure, IL&FS was unable to raise additional equity directly or at the level of its subsidiaries.
It was also unable to complete a merger with a strategic party which failed to consummate in the final stretch," the letter said.
According to him, new BOT-PPP (Built Operate Transfer-Public Private Partnership) projects in IL&FS' large subsidiary ITNL have been discontinued for three years now.
"With its mounting counter-party receivables and the need to continue with existing projects and the absence of long-term financial support in the markets, the asset-liability mismatch continued to aggravate almost inexorably. We believe that this structural conundrum needs to addressed for all infrastructure financing in the country," the letter said.
The government on Monday said that having a new board of IL&FS was the necessary first step towards restoring the confidence of the financial market in the IL&FS Group.
Defaults by some IL&FS group entities has triggered concerns of liquidity crisis in the financial markets.
As the government made a rare move to replace the board of IL&FS, a private and unlisted company, the turnaround efforts would be steered by Kotak as Non-Executive Chairman.
A noted banker, he is seen as a 'go-to man' and was a key person in pushing reforms in corporate governance practices.
The Kotak-led panel on corporate governance, appointed by markets regulator Sebi, came out with sweeping reform measures for stronger corporate governance practices and most of the suggestions, including those pertaining to splitting of Chairman and Managing Director posts at listed companies, have been accepted.
An insider said that Kotak Group is among those where there is a balance between the promoters' skin in the game and professional management.
Founder and CEO of Kotak Mahindra Bank, Uday Kotak has focused on value creation and the bank has a consolidated net worth of around USD 7 billion.
In March 2003, Kotak Mahindra Finance became the first non-banking financial company in the country to get a banking licence.
On Monday, the National Company Law Tribunal (NCLT) cleared the names of six individuals, including that of Kotak, to be appointed as directors on the board of IL&FS as recommended by the government.
Kotak would be the Non-Executive Chairman and the five other directors are Vineet Nayyar, G N Bajpai, G C Chaturvedi, Malini Shankar and Nand Kishore.
"The new board is tasked with the responsibility of preparing a robust and time-bound resolution plan," an official release said on Monday.
As per IL&FS' latest balance sheet, infrastructure and financial assets worth over Rs 1,15,000 crore are presently facing tremendous debt pressure and struggling to service around Rs 91,000 crore in debt which is the outcome of its mismanaged borrowings in the past, another official release said on Monday.
"The financial mismanagement of the IL&FS is apparent from its rapid debt built up and misrepresentation of the true state of financial fragility, which is being reflected in unprecedented rating downgrade from highly rated to a default category," it had said.