Mumbai: A power plant owned and run by troubled ILFS is facing threat of turning from a good asset into bad as a court permitted freeze on repayments prevents lenders from using funds generated by firm, discouraging banks from giving more working capital to unit.With no access to funds even from good assets that are generating cash flows, current strategy of ILFS management to put in place a moratorium on funds deposited by operating companies runs risk of even cash generators turning into stressed assets.ILFS has written to its trusteeship to stop further withdrawals from its escrow accounts to service debt.Discussions are on with lenders with regard to loan servicing and other debt-related matters, said a company executive on condition of anonymity.After NCLAT ruled in favour of a moratorium on repayment of loans, ILFS group companies and special purpose vehicles (SPV) are opting to not pay lenders despite some operating units generating cash flows.The court allowed a moratorium until further orders.
The matter will come up for hearing on January 28.
The view taken by company is that moratorium is for entire debt of Rs 91,000 crore.To be sure, ILFS Tamil Nadu Power Plant could default on its payment commitments as state government has delayed settlement of Rs 650 crore because of emergency arrangements toward relief and rehabilitation effort in aftermath of Gaja cyclone, said a source.The delay in settlement of dues was because of emergency arrangements toward relief and rehabilitation effort in aftermath of Gaja cyclone, said source.
The company is self-sufficient.ILFS declined to comment.ILFS Tamil Nadu Power Company (ITPCL) is incorporated by ILFS Group under energy platform for implementation of thermal power project at Cuddalore in Tamil Nadu.Of cumulative capacity, phase I of 1,200 MW project has commenced commercial operations.
The second phase will have 3 x 660 MW and final phase will have 1 x 660 MW with necessary approvals, according to companys website.Another executive said that dues to vendors and service providers at Tamil Nadu plant amount to Rs 8 crore.
The plant has won a 500 MW power supply deal with TN government in an auction bid on Power Exchange, and this has to be realised by end of January.ILFS group companies are not paying lenders even if cash flow of subsidiary is good, said a source close to development.
There was a default by some subsidiaries that have refrained from paying despite cash flow being good.
The legal view given to board is that companies should take directions from court on structuring payments, taking a holistic approach on debt repayment.Lenders, meanwhile, have expressed their concerns about making extra provisions by last quarter on loans classified as nonperforming due to their ILFS exposure.Rating companies have begun downgrading SPVs of ILFS due to risks of default after reversal in managements earlier stance of maintaining structured payments.
Last week, Crisil downgraded Jharkhand Road Projects Implementation Company from AA to BB.