Debt-Ridden IL&FS Banks On Rights Issue To Clear Dues: 10 Points

Infrastructure Leasing & Finance Services (IL&FS) chalks out a three-pronged strategy to revive itself.

Debt-Ridden IL&FS Banks On Rights Issue To Clear Dues: 10 Points

IL&FS has a debt burden of over Rs 90,000 crore.

Highlights

  • IL&FS management grilled with multiple questions on credit obligations
  • IL&FS is also in talks with lenders to open a fresh line of credit
  • Government, RBI monitoring the IL&FS crisis
Revealing a three-part strategy, debt-hit Infrastructure Leasing & Finance Services (IL&FS) said on Saturday that it needs to have a successful rights issue to recapitalise itself. In August, IL&FS's board approved a Rs 4,500-crore rights issue and a Rs 3,000-crore debt-reduction plan through asset sales. IL&FS is planning to arrange "liquid allocation to support repayment" till the asset sales cycle begins, said IL&FS Vice Chairman & Managing Director Hari Sankaran said at the annual general meeting (AGM). The three-part strategy of IL&FS includes a successful rights issue, ensuring liquidity remains to repay debtors till assets are sold and the selling of assets to pay back creditors, Mr Sankaran said at the AGM, which was attended by more than two dozen shareholders in Mumbai.

Here are 10 latest updates on the IL&FS crisis:

  1. "These strategies were explained in some detail to our shareholders and I ended the (meeting) by seeking their support for our proposal. I am very hopeful that we are able to meet their expectations," Mr Sankaran was quoted as saying in a report by news agency Reuters.

  2. The Reuters report quoted four shareholders as saying that the IL&FS management was grilled with multiple questions on its credit obligations and timelines for asset sales - which some analysts have said could take months to over a year.

  3. IL&FS 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, two of the shareholders, who own preferential shares of the company, said in the Reuters report.

  4. IL&FS is a major infrastructure finance and construction company, which has built up big debts and is now facing a credit crunch.

  5. On Thursday, however, LIC Mutual Fund said that it had received Rs 300 crore worth of dues from the construction major, with which all its outstanding payments were now cleared. Life Insurance Corporation (LIC), the largest shareholder of IL&FS, said on Friday that it is open to participating in the rights issue of the debt-hit company.

  6. Meanwhile, the government said that it would take appropriate action to ensure that there is no undue impact on the financial system owing to the IL&FS crisis.Debt defaults by certain group entities of diversified IL&FS has triggered fears of liquidity crisis in the financial markets and the Reserve Bank of India (RBI) has been taking steps to improve the overall cash situation. In a meeting chaired by Economic Affairs Secretary S C Garg, the finance ministry along with other stakeholders of the company, is believed to have discussed ways to sort out issues related to IL&FS so that the contagion does not impact other sectors of the economy.

  7. RBI officials also met the two largest shareholders of IL&FS - LIC and Orix Corporation of Japan - on Friday.

  8. IL&FS Financial Services, a subsidiary of IL&FS, said it defaulted on commercial papers, a term loan and missed interest payments on non-convertible debentures all due on Friday.

  9. Earlier this week, IL&FS defaulted on interest payment and fixed deposits. This was the fourth in the series of defaults by the group entity.   

  10. IL&FS, where LIC is the largest shareholder with 25.34 per cent stake, has a debt burden of over Rs 90,000 crore. Japan's Orix Corporation has 23.54 per cent stake in the company. Other shareholders include Abu Dhabi Investment Authority (12.5 per cent stake), IL&FS Employees Welfare Trust (12 per cent), HDFC (9.02 per cent), Central Bank of India (7.67 per cent) and SBI (6.42 per cent). These are the shareholding figures at the end of March, stated a report by news agency Press Trust of India. (With agencies inputs)