IL&FS seeks NCLT nod to place ~4K cr of assets in INVIT

The IL&FS group has sought approval from the National Company Law Tribunal (NCLT) to move five highway assets of the beleaguered group to an infrastructure investment trust (INVIT). An independent assessment has valued the projects at ~4,000 crore, said a company spokesman while confirming the development. The valuation is a regulatory requirement under the Securities and Exchange Board of India (Sebi) rules.

With the NCLT approval, a total of 11 projects would be ready for monetisation through the INVIT route. The first tranche of six projects valued at around ~9,200 crore already have the NCLT approval.

The monetisation would help IL&FS take some debt off its books, with the existing lenders getting units in the INVIT. These road assets would be transferred to a newly formed Roadstar INVIT after approval from the Tribunal and lenders.

Once the approvals are in place, investors can pick units in the INVIT, in accordance with a bailout plan worked out for the group.

The road projects are currently being held by special purpose vehicles (SPVS) that have IL&FS Transportation Networks Ltd (ITNL) as their holding company.

On transfer to INVIT, these SPVS would move away from debt servicing moratorium extended to the IL&FS companies and will start servicing their debt, resulting in resolution of these SPVS.

The plan is to resolve over ~16,000 crore of debt through the INVIT route.

The INVIT has already received final registration from Sebi and all other formalities are in place to set it up.

To be able to service the capital — both the equity and loans — ITNL needs to receive cash flows from its SPVS. Most of these projects are, however, affected by low underlying economic value due to factors like cost overruns and high development cost. There is also an increase in interest cost. Revenue is also lower which has impacted the profitability of the projects.

ITNL had standalone liabilities of ~18,000 crore as of September 30, 2018. This includes loans of ~2,500 crore from the IL&FS group and ~1,500 crore in trade payables to EPC contractors.

Loan and investment to its domestic SPVS stood at ~11,900 crore. Of this, it had an exposure of ~5,700 crore to 14 operational roads, 11 of which would move to the INVIT.