IL&FS jitters erode 12.5% of MF assets; AUM shrinks to Rs 22 trn in Sept

The crisis linked to Infrastructure Leasing & Financial Services (IL&FS) has hit the mutual fund (MF) industry hard, with 12.5 per cent, or Rs 3.16 trillion, of industry assets getting shaved off in a single month. Total assets under management (AUM) shrunk to Rs 22.04 trillion in September from Rs 25.2 trillion at the end of August.

Most of the damage was due to record outflows from liquid and fixed-income schemes, where large investors invested. The two schemes saw outflows of Rs 2.4 trillion in September — the most since at least January 2008. The pullout in debt market schemes alone accounted for close to 10 per cent of August’s AUM tally.

Industry participants attribute the sharp pullout to nervousness among corporate investors following the IL&FS default, which had quasi-sovereign status. The large amount of outflow has caught the industry by surprise. Industry had earlier estimated outflows in such schemes at around Rs 1 trillion. 

Bad news for creditors as IL&FS, 40 arms move NCLT seeking debt protection

Debt-laden infrastructure financier IL&FS and its 40 subsidiaries have filed a petition with the Mumbai Bench of the National Company Law Tribunal (NCLT) seeking to restructure its debt under Section 230 of the Companies Act 2013.

The company moved the NCLT Mumbai on Monday “seeking certain reliefs” in connection with filing of scheme of arrangement under Section 230 of the Companies Act, said IL&FS in a filing with the exchanges. The scheme will be prepared in compliance with applicable laws and subject to necessary consents of shareholders, creditors and boards of directors of the relevant entities.

IL&FS subsidiaries include IFIN, ITNL, IL&FS Energy Development and IL&FS Engineering & Construction Ltd. The other companies include roads and construction companies.

The Section 230 to 240 of the Companies Act, 2013, contains provisions on ‘Compromises, Arrangements and Amalgamations’, that covers compromise or arrangements, mergers and amalgamations, corporate debt restructuring, demergers, fast track mergers for small companies/holding subsidiary companies, cross border mergers, takeovers, amalgamation of companies in public interest, etc.