Debt-laden IL&FS plans to sell 25 assets to raise Rs 300 billion

The brass of Infrastructure Leasing & Financial Services (IL&FS) held a meeting on Monday to strategise how to bring back the troubled company on track.
 
The company is staring at a mismatch between loan repayments worth Rs 250 billion in the next one year and sagging cash flows.
 
The group’s management is planning to sell 25 assets worth Rs 300 billion and raise an additional Rs 45 billion by way of a rights issue at Rs 150 a share.
 

The fire sale of assets, however, may not receive a good response owing to lack of investor interest, say analysts.
 
The IL&FS management is talking to its top shareholder — Orix Corporation of Japan — to infuse more funds into the company in case any shareholder backs out during the rights issue.
 
IL&FS employees, who hold 10 per cent shares, and Central Bank of India, which owns 7.6 per cent shares, may not invest in the rights issue due to its own bad debt problem, say insiders.
 
“With the government ruling out a bailout, it will be up to IL&FS shareholders to pitch in with funds. Orix Corporation is keen to invest in the troubled group if there are no skeletons or surprises in the RBI's audit reports,” said an insider.
 
“Besides, many shareholders are not interested in investing at a premium of Rs 140 a share when the company and its subsidiaries have defaulted,” said a shareholder. According to an email sent by IL&FS Vice-Chairman Hari Sankaran to employees, of the 25 assets, the group has received an expression of interest for 14. Most of these projects are in the roads, ports and energy sectors, said a banker close to the development.

 

 

The RBI has also called a meeting of IL&FS management and its top shareholders including Orix Corporation of Japan, Life Insurance Corporation and State Bank of India on Friday to seek their plan on reviving the financial institution. The annual general meeting is shareholders scheduled on Saturday.
 
The IL&FS top management also saw a churn with new faces joining the group management board. Apart from Sankaran, the new leadership comprises Arun Saha, Vibhav Kapoor, K Ramchand, Kaushik Modak, RCM Reddy, Ashwani Kumar, Mahesh Babu and Mukund Sapre.
 
Modak has taken over as managing director and chief executive officer of IL&FS Financial Services (IFIN) after the company defaulted to commercial papers and has been banned by the Reserve Bank of India to access the CP market till March next year. On Monday, IFIN defaulted on another commercial paper repayment obligation.

 
The RBI has also asked IFIN to reduce group exposure which has increase to 25 per cent of its total loan book. Modak will lead the implementation of the new business plan which the company was developing for the last one year, insiders said.
 
Two of the group companies are facing National Company Law Tribunal (NCLT) proceedings initiated by the State Bank of India following a bank default and Dighi Port in Maharashtra. IL&FS has moved the Madras High Court against taking its power plant to the NCLT where the matter is currently pending.