IL&FS: Desperate times, desperate measures

The government-appointed board of debt-laden Infrastructure Leasing and Financial Services (IL&FS) has submitted its second progress report to the National Company Law Tribunal (NCLT) wherein it outlines a plan to cut its workforce by 65% in order to rationalise costs.

The Uday Kotak-led board, that took charge in October, said in the 18-page report that manpower optimisation initiatives such as salary rationalisation and separation of superannuated consultants have been executed. The report also mentions that this exercise is likely to result in net savings of nearly ₹100 crore on an annual basis.

The board said that phase II of the plan includes talent restructuring and amalgamation of roles and responsibilities. In essence, the IL&FS group will be slashing about two-thirds of its total workforce.

“These steps will yield an approximately 50% savings in the wage bill of the IL&FS Group. Several other initiatives are being initiated and that will bring down total manpower of the IL&FS Group by approximately 65% and wage cost by 50% respectively," said the report.

The board also said that letting go of non-essential real estate premises like guest houses has reduced operating costs and provided some liquidity with a cost rationalisation of about ₹7.7 crore.

The report adds that pulling down the shutters of the group’s offices at various locations yielded savings of ₹4.9 crore while leasing of IL&FS’ offices resulted in ₹13.5 crore in rentals coming in with ₹6.7 crore in security deposits. The board is now looking at other proposals for selling more non-core assets to improve the insolvent company’s liquidity situation.

Alvarez & Marsal, the group’s resolution advisor is evaluating the short and medium term liquidity for each group entity and coming out with 13-week cash flow estimates for the next 12 months.

The report mentioned that over 165 entities had already been reviewed with nearly 100 having operational cash gap till March 31, 2019. Among the entities that will face a cash crunch are IL&FS, IL&FS Transportation Networks and its subsidiaries along with Elsamex (India), IL&FS Energy Development Company (holding company for the energy vertical), IL&FS Engineering & Construction Company, IL&FS Environmental Infrastructure & Services Ltd. and several of its subsidiaries.

Last month, IL&FS invited expressions of interest (EoIs) to buy its entire stake in IL&FS Securities Services Limited (ISSL) and ISSL Settlement & Transaction Services Limited (ISTSL). The company said over a dozen EoIs were received by the cutoff date, November 23. Towards the end of November, IL&FS also invited EoIs for its renewable energy business; December 10 is the last day for the submission of EoIs.

The board is also evaluating and initiating more divestments such as IL&FS Education, IL&FS Technologies, ONGC Tripura Power Company and IL&FS Paradip Refinery Water Limited in the coming weeks, according to the new report.