The troubled Infrastructure Leasing and Financial Services Ltd (IL&FS) has chalked out a "comprehensive restructuring plan" to raise funds from shareholders and offload assets it built over the last few decades in order to pay up its mounting liabilities and return to solvency.
Soon after a closed-door annual general meeting (AGM) with more than two dozen shareholders, IL&FS vice chairman and managing director Hari Shankaran said the company's priority was to execute a successful rights issue, and sales of assets, mostly road construction projects. He said that IL&FS is planning to arrange liquid allocation to support repayment of their debtors till the asset sales cycle begins.
IL&FS will also pursue a moratorium under the Companies Act to come up with a restructuring plan that works for both creditors and shareholders. The first part will be to complete the rights issue and enable the company to re-capitalise itself, according to Shankaran. It plans to raise up to Rs 4,500 crore through a rights issue. The second part will be to sell assets, while the third part will be to get liquid allocation to support repayment of debtors till its assets sales begin, said Shankaran.
Reuters quoted him as saying that he is "very hopeful" to meet the shareholders' expectations, adding that their strategies were explained in some detail to them. The company is also in talks with lenders to open a fresh line of credit, seek an extension for upcoming debt payments, and secure bridge financing to avoid further defaults.
As IL&FS ran the risk of pushing several of its lenders into the a debt trap, following a series of defaults and credit downgrades in recent weeks, it sparked fears of a crisis in India's non-banking financial services sector, pushing stock market indices on a steady decline over last two weeks.
IL&FS, a major infrastructure financing and construction firm in which Life Insurance Corporation (LIC) and State Bank of India (SBI) owned considerable stake, hopes to sew up fresh funding from lenders to meet its immediate credit obligations.
On Friday, LIC said it was willing to participate in the Rs 4,500 crore rights issue that IL&FS proposed in August. LIC, India's biggest insurer, owns a 25.34% stake in the company.
Reuters reported that the company management was grilled with multiple questions on its credit obligations and timelines for asset sales, quoting four shareholders. Analysts however believe that the whole process may take up to a year.
IL&FS, which is under Rs 91,000 crore ($12.55 billion) of debt, has previously said 14 of its 25 assets had seen interest from buyers, and that it plans to raise up to Rs 3,000 crore through the asset sales.
Other large shareholders of IL&FS include the ORIX Corp of Japan, which holds 23.54% stake and Abu Dhabi Investment Authority (ADIA) that owns 12.56%. India's biggest lender by assets, SBI has a 6.42% stake in IL&FS.
(With inputs from news agencies)
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Reuters quoted him as saying that he is "very hopeful" to meet the shareholders' expectations, adding that their strategies were explained in some detail to them. The company is also in talks with lenders to open a fresh line of credit, seek an extension for upcoming debt payments, and secure bridge financing to avoid further defaults.
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