The new board of Infrastructure Leasing & Financial Services will, on Wednesday, present to the National Company Law Tribunal (NCLT) its blueprint for taking the beleaguered company out of trouble. The plan includes sale of more than 25 core assets and several non-core assets. The board has also examined the possibility of selling the entire group without splitting up the subsidiaries.
“There are a number of very good assets within the group which will get good value. The objective would be to pick a strategy that will maximise the value for the company and, at the same time, ensure that the lenders with exposure to IL&FS do not have to take a massive haircut,” said a source close to the new board headed by Uday Kotak.
Restructuring
IL&FS has a debt of nearly ₹90,000 crore, which could be one of the hurdles if the entire company is to be sold as one entity. The other problem is that the group has over 300 subsidiaries. Any new owner would not like to take on an entity with such high debt and a complex structure. “One of the things that the new board has examined is to identify which of the subsidiaries have solid businesses and which are merely on paper. There could a restructuring of the entire group before any sale is contemplated,” said another source.
Some of the entities of IL&FS have defaulted several times, even after the new board took over. On Tuesday, ILFS Transport Networks (ITNL) said it has defaulted on payment of interest on six separate non-convertible debentures for the period between July 27, 2018, and October 26, 2018. ITNL also said that its Managing Director, K Ramchand, has resigned with immediate effect. There have been several other big exits from IL&FS Group since the meltdown started earlier this year.
Rights issue
The big issue facing the company is the lack of liquidity to keep the debts serviced. While existing shareholders have not shown interest to a rights issue to raise ₹4,500 crore, banks are wary to lend more money without seeing a plan to revive the company.
The other worry is the various investigations being carried out against the former management. The Serious Fraud Investigation Office has started looking into the company’s complex structure and the money trail into various foreign subsidiaries.
The IL&FS Group has 348 direct and indirect subsidiaries. Its investors include Life Insurance Corporation, State Bank of India, Housing Development Finance Corporation, and Japan’s Orix Corporation.