World Bank steps in to defuse IL&FS Ethiopia crisis

The Ethiopian authorities have resorted to imprisonment and salary blocking of Indian employees in Ethiopia as the company’s financial troubles heightened.

“We would comment that the safety and fair treatment of all those working on World Bank-financed projects is of utmost importance to us. We are closely monitoring the situation and have requested the Ethiopian Roads Authority to work to resolve the issue as soon as possible,” James Robert Markland, senior transport specialist and the World Bank’s Task Team Leader for the project, said.

ITNL-Elsamex is a joint venture between IL&FS Transportation Networks Ltd and Elsamex SA. This Indo-Spanish joint venture is engaged in road projects for the Ethiopian Roads Authority.

Of the 44 Indians working for the joint venture, 36 were called back to India and none of them has been paid for the last 6-8 months, according to Rajesh Davuluri, an IL&FS employee in Ethiopia.

Four of the remaining eight Indian employees in Ethiopia are being held hostage by the local employees since 24 November in the Bure-Lot 3 camp. The other four employees are in Addis, around 500 km away from Bure. None of them has been paid since July.

The external affairs ministry and the India embassy in Addis Ababa have accorded highest priority to resolution of the IL&FS hostage crisis and are actively pursuing the matter with the Ethiopian authorities.

Meanwhile, rating agency ICRA has downgraded one scheme of Aditya Birla Mutual Fund and put five other schemes of HDFC Mutual Fund and UTI Mutual Fund under rating watch due to their exposure to the special purpose vehicles (SPVs) of the troubled IL&FS.

“The rating action takes into account the deterioration in the credit quality of the underlying investments of these schemes driven by their exposure to the special purpose vehicle (SPV) of IL&FS Ltd,” ICRA said in a statement.

ICRA noted that the schemes have exposure to Hazaribagh Ranchi Expressway Ltd or Jharkhand Road Projects Implementation Company Ltd or Jorabat Shillong Expressway Ltd. The default risks of the various SPVs have increased given the recent communication by their management to the trustees of these schemes, seeking stoppage of future repayments based on an order of the National Company Law Appellate Tribunal (NCLAT) dated 15 October 2018, the rating agency said. The NCLAT had passed an interim order on 15 October, granting a moratorium on all creditor actions against IL&FS and its group companies.

Further, in January 2019, two SPVs of IL&FS demanded a refund of the debt payment executed by them after 15 October 2018, from their trustees. Despite a ring-fenced structure and adequate cash flows to service the debt obligations, the SPVs have asked the trustees to stop debiting the escrow account towards future obligations.