Crisis-hit IL&FS’s efforts to sell 3 of its units clouded by past failed attempts
MUMBAI/NEWDELHI: Infrastructure Leasing and Financial Services Ltd’s (IL&FS) bid to sell three of its units in the past two years to pare debt were stymied because of valuation mismatches and bureaucratic red tape, calling into question the group’s ongoing efforts to dispose of some of its biggest assets to meet immediate payment obligations and avoid bankruptcy.
IL&FS is planning to sell a majority stake in its financial services unit, as well as assets totalling ₹4,500 crore, to trim debt after defaulting on several payments in the past two months.
Over the past two years, before the current liquidity crisis emerged, IL&FS has attempted to divest at least three units— IL&FS Financial Services (IFIN), IL&FS Transportation Networks Ltd (ITNL) and IL&FS Energy Development Co. Ltd (IEDCL).
The efforts, however, failed despite interest from prospective buyers, including a US private equity firm and Piramal Group.
Given its dismal track record, some experts now question the 14-member board’s ability to sell the stake in the financial services unit and whether it would be enough to steer IL&FS out of crisis. “The board had seen this situation coming. Two years ago, we had recommended sale of IFIN, energy vertical and ITNL to address the debt situation immediately. In fact, we had also found a potential buyer in an American company that came forward... but that buyer retracted because of the deteriorating financial situation,” an executive familiar with the development said on the condition of anonymity.
Another executive involved directly with the negotiations then blamed the reluctance of the government, which through Life Insurance Corp. of India’s 25.34% ownership of IL&FS, did not approve the sale.
“Let us be clear. At least on one occasion, it was not just the board’s fault for not being able to sell the subsidiaries. The decision to sell eventually was beyond just the board’s,” the second executive familiar with the development said on condition of anonymity. “One of the largest shareholders in the group, then did not agree for the sale.”
Emails sent to IL&FS and LIC seeking comment went unanswered. Mint on September 21 reported that IL&FS is planning to sell a majority stake in its financial services unit and additional assets worth ₹4,500 crore to pay down debts.