Wednesday, March 30, 2022

Uday Kotak is leaving IL&FS but confirms that the firm has realized Rs 55,000 crore of its debt

Outgoing IL&FS chief Kotak estimates 62% debt realised

 Uday Kotak, the MD of the Kotak Mahindra Bank is also the chairman of the IL&FS but he is stepping down after a three and half years stint. While he has been the chairman, he has confirmed that Rs 55,000 crore of the debt in the IL&FS firm has been realized which constitutes to about 62% of the total debt.

For IL&FS, this is a major step and as such it is a great progress towards 100% debt realization whereas the total debt stands at Rs 92,000 crore. It is to be noted that IL&FS has confirmed the sale of its headquarters to the Canadian equity firm Brookefield. 

Kotak also suggested that the complex policies around other subsidiary companies should be reduced and it exists to reduced governance. “From a system point of view, irrespective of the public or private sector, the nature of the structure of groups and conglomerates needs a very close watch by regulators and policymakers. You cannot have a complex animal or a hydra which gets out of control over time,” replied Kotak. 

His point may have a bigger inference but it might be tough to reduce the governance around the companies as such involved in businesses like IL&FS.

Kotak also mentioned that faster judicial resolution will lead to better company governance and a faster rate at which the businesses can work. He mentioned that governments can start working towards honoring contracts and speedy payments from government entities can help companies to survive and even grow. He expressed that policy makers have a long way to go in these regards.

Our take is that, even though Kotak’s point of view is correct, our current corporate structure and governance rules cannot help in any way. There needs to be a bigger change of law at the country level to enable the same. Do we want such a change? We do not have an answer, but Uday Kotak seems like he wants that change.

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