IL&FS plans fire sale of its financial services unit, assets worth ₹4,500 cr
MUMBAI/NEWDELHI: Infrastructure Leasing and Financial Services Ltd (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 as the company rushes to meet its obligations and avoid bankruptcy.
IL&FS has also asked the government to clear dues worth as much as ₹16,000 crore for work completed by the company, three executives familiar with the development said, requesting anonymity.
Without clarity on whether the government will release payments, it’s critical for IL&FS to liquidate assets to avoid being dragged to a bankruptcy court. Disputes over contracts, delayed approvals for projects and rising interest rates have led to a cash crunch at the lender, resulting in IL&FS missing several repayment obligations.
A bankruptcy may choke the government’s infrastructure push and slow down economic growth.
“The (IL&FS) board has recommended that some of the assets be sold to meet the liquidity requirement,” said one of the three executives cited above.
IL&FS has hired SBI Capital Ltd to find an investor for the majority stake in IL&FS Financial Services, which reported a ₹99.6 crore profit in the year ended March 3.
“We have been mandated to find a majority shareholder in IL&FS Financial Services, wherein we are engaged,” a spokesperson for SBI Capital said in response to an emailed query.
Parent IL&FS reported ₹584.32crore profit and had net assets valued at ₹6,950.19 crore. It reported a profit through dividend income from many of its 121 Indian units and 52 foreign subsidiaries. IL&FS also has 12 Indian associates, three foreign associates, 36 Indian joint ventures and six foreign joint ventures, according to the 2018 annual report.
The SBI Capital spokesperson added that his firm was also hired to analyse the road portfolio and suggest the course of action for IL&FS Transportation Networks Ltd (ITNL)—the IL&FS unit that builds roads.
“SBI Cap has advised that six projects could be terminated and 10 operating projects could be sold,” the spokesperson said.
An email sent to a public relations firm hired by IL&FS seeking comment remained unanswered till press time.