IL&FS crisis impacts JVs with Rajasthan, Jharkhand, Chhattisgarh, Andhra

With the Infrastructure Leasing and Financial Services (IL&FS) group in crisis, it is not just the Centre but even states like Rajasthan, Jharkhand, Chhattisgarh and Andhra Pradesh which may need to step in to ease the deadlock around certain projects.

The 348 companies in the group include its joint ventures with various state governments. 

Two of these state joint venture-related entities are now placed under a negative rating watch. India Ratings on Wednesday placed non-convertible debentures (NCDs) of Jharkhand Road Projects Implementation Company’s (JRPICL’s) on ‘rating watch negative.’ A similar action was taken on RIDCOR Infra Projects Ltd (RIPL) last month.

India Ratings has also raised concerns on the operations and maintenance (O&M) risks for these two entities in separate rating notes released in the last fortnight. JPRICL, which is wholly owned by the IL&FS group, is implementing five projects totalling 627 lane km. This is under a programme development agreement (PDA) to improve 1,500 km of select road corridors. The PDA was signed between Jharkhand and IL&FS. It is being implemented under a special purpose vehicle.

At stake is the O&M of five road projects in Jharkhand, totalling 627 lane km, and in Rajasthan, which is part of Phase-III of the highway project.

RIPL is a wholly-owned subsidiary of RIDCOR, which is a 50:50 joint venture between IL&FS and the government of Rajasthan. RIDCOR is involved in development and maintenance of Phase-III project stretches under the mega highways project. “Phase-III comprises 65.5 km Mathura-Bharatpur-Gangapur-Bhadoti stretch starting from the Uttar Pradesh border and running up to the 117.32 km Rawatsar-Nohar-Bhadra near the Haryana border,” according to the India Ratings report.

Besides road, IL&FS has also partnered the Rajasthan government for development of solar parks. Rajasthan has a joint venture with the group’s energy subsidiary IL&FS Energy Development Company, to develop solar parks aggregating 5,000 MW. Of this, the first 1,000 MW of solar parks is being developed, according to the IL&FS annual report.

The group’s projects with state governments include a PDA signed between the Chattisgarh government and IL&FS in 2007. According to the Chattisgarh Highway Development Company’s annual report, the agreement expired in 2010 and claims owing tothe termination of the agreement are still pending. 

Chattisgarh Highway Development Company is an IL&FS group subsidiary.

IL&FS is also involved with the Andhra Pradesh government as it was roped in to manage its urban development funding, among other things. 

According to IL&FS’s annual report, a subsidiary formed between IL&FS Investment Managers and the state is the fund manager to Andhra Pradesh Urban Development Fund. 

The subsidiary’s other responsibility includes providing end-to-end solutions to various municipal and urban local bodies in the state.

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