The legendary IL&FS headquarters in the Bandra Kurla Complex (BKC) has been sold to Brookfield Asset Management for 1,080 crore, the board of the fraudulent conglomerate said on Tuesday.
The deal was signed on March 25 and Brookfield has paid a performance bond of ₹108 crore.
“The Memorandum of Understanding has been signed and NCLT filing has occurred,” CS Rajan, MD, IL&FS announced at a press conference.
The owner of the building, which was completed in the 1990s, is the group company TIFC. It will change hands over the course of 2022-23, he said.
“To me, IL&FS is symbolized in many ways by this outstanding building, which is one of the first buildings in BKC,” said non-executive chairman Uday Kotak.
“We as a public interest body have done the right thing for everyone involved and this is probably one of the last major decisions made during my tenure. It was a team job but there was sadness [signing] Event. But we wanted to do the right thing,” he added.
He said there were many interested parties, but most had problems with the structure of the building. He explained that it went to the best buyer and said the property “sold for ₹29,000 per square foot, which is the prevailing price in BKC”.
For a while, IL&FS will use some space in this 4.5 lakh square foot building to continue the debt resolution process.
On Tuesday, Uday Kotak announced that his term as non-executive chairman of IL&FS ends on April 2nd. The government appointed him the new CEO in October 2018.
Mr. Rajan, the current Managing Director, has been appointed Chairman and Managing Director of IL&FS by the Ministry of Corporate Affairs for a period of 6 months from April 3rd.
Commenting on the lessons he has learned over the past three and a half years in dealing with the IL&FS ‘fiasco’, Mr. Kotak said: ‘Speed is important [handing such] crises rather [than] Wrangling that often takes place between different policy makers.”
“Six layers of governance didn’t work [which led to this crisis]. This includes company management, the board of directors, institutional shareholders, rating agencies, auditors and regulators. From a governance perspective, we had six tiers and the challenge was the structure (of operations) of IL&FS, he said.
“From a systems perspective, the nature of the structure of groups and conglomerates, whether public or private sector, whether IL&FS or any other group, needs to be closely monitored by regulators and policy makers. So you don’t have a complex animal or hydra that gets out of control over time. I hope this will be clearly observed as we move forward,” he added.
The new board, which met on Monday, estimated the company had paid 55,000 crore of debt to date, compared with 52,200 crore in November 2021.
The incremental settlement of over £2,700m since November 2021 has included £1,080m from the sale of the head office, £900m as part of the Khed Sinnar claims settlement with NHAI, £230m from the settlement of IFIN’s non-performing credit accounts and £520 crore from other recoveries.
In addition, the group has serviced ₹1,000 crore of debt from companies designated as green entities.
The group maintained its total resolution estimate at ₹61,000 crore, which is 62% of the total debt of more than 99,000 crore as of October 2018.
“The debt addressed to date (55,000 crore) accounts for over 90% of the estimated total solution value. The resolution of the remaining ₹6,000 crore of debt will be deferred to FY23,” Mr Rajan said.
“This overall dissolution estimate of 62% is twice the average recovery of 31% among IBC,” he added.
“This was largely possible due to the continued commitment of the new board and management to preserving the value of assets of national importance and maintaining going concern status,” he added.
Of the 347 companies in the IL&FS Group (as of October 2018), 246 have been dissolved, leaving 101 companies to be dissolved in the next financial year.
A request has been made to NCLAT for an interim distribution of ₹16,000 crore in cash and InvIT units available across the group. More than 75% of the amount would be distributed to creditors of three major holding companies – IL&FS, IFIN and ITNL – which have a large base of public fund creditors.
Mr. Kotak and Mr. Rajan stressed that they had to face several challenges in finalizing the resolution, which in turn affected the timetables.
“Some of these are the existence of complex ownership agreements and a web of intercompany loans, non-payment of fees by state utilities to ITPCL, delayed receipt of pension payments from some state governments, obtaining various approvals from other stakeholders including lenders, shareholders and joint venture partners , coercive actions by creditors and ongoing court cases by various lender groups, subcontractors and authorities,” said Mr. Rajan.