No de­ci­sion on IL&FS liq­uid­ity in­fu­sion yet

Board ap­points Al­varez & Marsal to pre­pare re­cast plan for the group

Business Standard - - FRONT PAGE - AB­HI­JIT LELE

With no clar­ity on im­me­di­ate liq­uid­ity in­fu­sion and rights is­sue by share­hold­ers, cash-strapped In­fra­struc­ture Leas­ing & Fi­nan­cial Ser­vices (IL&FS) in its board meet­ing on Satur­day ap­pointed global pro­fes­sional ser­vices firm Al­varez & Marsal to pre­pare a com­pre­hen­sive re­struc­tur­ing plan for the group.

Hari Sankaran, vice-chair­man and MD, IL&FS, said in a video state­ment that the board took four im­por­tant de­ci­sions. Al­varez & Marsal would de­velop a de­tailed re­struc­tur­ing plan for the group to demon­strate to share­hold­ers and lenders that it was self-suf­fi­cient in re­pay­ing its li­a­bil­i­ties. So far, the IL&FS man­age­ment had been work­ing on its re­vival plan.

The com­pany will con­tinue to pur­sue ap­pli­ca­tion un­der the Com­pa­nies Act to en­sure it has con­trol to sat­isfy cred­i­tors and share­hold­ers that it has ca­pac­ity to ser­vice debt and eq­uity. Fi­nally, it would im­ple­ment as­set mon­eti­sa­tion ac­tiv­ity, which is con­sis­tent with the re­struc­tur­ing plan, he said.

The state­ment was silent on the time­line by which the re­struc­tur­ing plan would be pre­sented and its sub­se­quent roll-out.

Share­hold­ers would take the fi­nal de­ci­sion on cap­i­tal in­fu­sion and liq­uid­ity, based on the new re­struc­tur­ing plan, said sources.

Be­sides the board meet­ing, IL&FS also had its an­nual gen­eral meet­ing (AGM) ear­lier Satur­day, where Sankaran pre­sented a three­p­ronged strat­egy be­fore share­hold­ers to bring back nor­malcy to the group’s op­er­a­tions. How­ever, they were skep­ti­cal about the man­age­ment's ef­forts to tackle prob­lems.

Sankaran said the first el­e­ment was to have a suc­cess­ful rights is­sue to en­able the com­pany to re­cap­i­talise it­self. The sec­ond ac­tion point is “to sell as­sets which the com­pany has built over the last few decades to en­sure that value can be up­streamed and re­pay cred­i­tors”. The third el­e­ment is to get liq­uid­ity to re­pay debtors till its as­set sale cy­cle be­gins.

The com­pany plans to raise ~45 bil­lion from a rights is­sue, which is ex­pected to be com­pleted by Oc­to­ber 30. Life In­sur­ance Cor­po­ra­tion of In­dia (LIC), which is the largest share­holder with 25 per cent stake, and State Bank of In­dia have in­di­cated will­ing­ness to par­tic­i­pate in rights is­sue. Orix Cor­po­ra­tion, Japan, hold­ing over 23 per cent stake, is yet to com­mit to the rights is­sue.

As on March 31, 2018, IL&FS net worth was ~74 bil­lion.

In ad­di­tion, the board has also given nod for re­cap­i­tal­is­ing group com­pa­nies to the ex­tent of ~50 bil­lion in IL&FS Fi­nan­cial Ser­vices, IL&FS Trans­porta­tion, IL&FS En­ergy, IL&FS En­vi­ron­ment, and IL&FS Ed­u­ca­tion.

The com­pany plans to raise ~160 bil­lion from the sale of its op­er­a­tional road as­sets. How­ever, some of these are in de­fault at present, which will be a hur­dle in monetis­ing.

The com­pany is seek­ing le­gal re­course for the sale of its as­sets and has al­ready got in­ter­est from buy­ers for its road as­sets. Faced with liq­uid­ity pres­sure, it may shortly speak with lenders for a mora­to­rium on pay­ments, said sources.

The board also ap­proved the com­pany’s spe­cific as­set di­vest­ment plan based on which IL&FS ex­pects to re­duce its over­all debt by ~300 bil­lion. Its con­sol­i­dated debt is pegged at over ~910 bil­lion.

Out of a port­fo­lio of 25 projects iden­ti­fied for sale, it has re­ceived firm of­fers for 14 projects. The com­pany ex­pects to com­plete its di­vest­ment plan over the next 12 to 18 months in a sys­tem­atic and pro­fes­sional way to ful­fil its com­mit­ments.

LIC rep­re­sen­ta­tives at the AGM are be­lieved to have raised an is­sue of con­duct­ing re­view of op­er­a­tions, and that IL&FS should take pro­fes­sional help from con­sult­ing firms on sale of as­sets and its plan. Re­spond­ing to it, the man­age­ment replied that the board of di­rec­tors was con­sid­er­ing all those is­sues.

Mean­while, share­hold­ers vented anger over mis­man­age­ment at IL&FS, with one share­holder telling the me­dia af­ter the meet­ing that he re­gret­ted hav­ing bought the pref­er­ence shares few years ago.

An­other share­holder said his fam­ily had in­vested in the pref­er­ence shares look­ing at names of mar­quee share­hold­ers like SBI and LIC.

The turnout of share­hold­ers at an­nual gen­eral meet­ing was thin. Those who at­tended the meet­ing said there were ex­pec­ta­tions that they will come in more num­bers given the crisis fac­ing the com­pany.

Source: Com­pany

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