Domestic rating agency ICRA on Monday junked the short-term and long-term borrowing programmes worth over ₹12,000 crore by the already crippled IL&FS group and one of its arms, and removed the entire group entities from its rating watch with developing implications.

The infrastructure development and finance group has been facing liquidity issues for some time and has defaulted on a Rs 1,000 crore debt from Sidbi earlier this month.

Again, on September 14, it defaulted on a Rs 105-core CP redemption and the next day, it defaulted on Rs 80-crore inter-corporate deposits (ICDs).

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This is the second successive downgrading to junk status by ICRA in a fortnight. The group is sitting over a debt pile of over Rs 91,000 crore. Of this, Rs 57,000 crore are bank loans alone most of which is from state-run banks.

Icra downgraded IL&FS’ the borrowing plan of Rs 8,075 crore to ‘D’ Monday. This include an NCD issue of Rs 5,225, a commercial paper programme of Rs 2,500 crore and long term loans of Rs 350 crore. These have been removed from rating watch as well.

Its subsidiary IL&FS Financial Services has a combined borrowing plan of Rs 4,000 crore through commercial papers and this has also been junked to D. It has a standalone debt of Rs 17,000 crore.

“The rating revision takes into account the recent irregularities in debt servicing by the company. The liquidity position at the group level remains under challenge given the delays in raising funds from the promoters in accordance with the earlier stated plans, deterioration in the credit profile of key investee companies and sizeable debt repayment obligations,” Icra said in a note.

It can be noted that the group had planned a Rs 4,500 crore rights issue and Rs 3,500 crore long-term credit from its shareholders. But these plans are yet to be finalised. The emergency board meeting Saturday failed to secure immediate liquidity support.

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“The liquidity profile of the group has been under pressure given the delays in fund raising as initially envisaged, deterioration in credit profile of key investee companies and the sizeable repayment obligations at group level in the near term,” Icra said.

The group has a gearing of 3.04 times (on a stand- alone basis) and regulatory gearing of 2.30 times (reported gearing of 2.60 times and regulatory gearing of 2.23 times as of March 2017 respectively).

The Icra report noted that IL&FS Financial Services was unable to meet the Rs 105 crore CP redemption obligations on September 14. Furthermore, on September 15, it had received notices for delays and defaults in servicing some of Rs 80- crore of inter corporate deposits.

Late last month too, the financial services arm had witnessed a delay in redemption of CPs due on August 28, and 30, 2018 due to what claimed to be technical reasons following which it was barred from accessing the CP market till February 28, 2019. Following this, on September 4, Icra had downgraded the group to junk.

Last week, it had claimed in a letter to employees that if the Rs 16,000 crore of its funds stuck with concession authorities were released on time, it wouldn’t have landed in the mess it is currently in.

At the September 15 board meeting, IL&FS had appointed ex-LIC chairman SB Mathur as new non-executive chairman following LIC managing director Hemant Bhargava’s deciding to step down as non-executive chairman of the group.

As of March 2018, LIC and Orix Corporation of Japan were the largest shareholders of IL&FS with 25.34 and 23.54 per cent respectively, while Abu Dhabi Investment Authority, HDFC, Central Bank of India and SBI hold 12.56 per cent, 9.02 per cent, 7.67 per cent and 6.42 per cent, respectively.

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