Exiting non-core ventures: IL&FS to sell waste-to-energy, water, cluster businesses

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Mumbai | Published: September 1, 2018 1:51:21 AM

Mumbai-based infrastructure finance major IL&FS Group has identified about four-five non-core business verticals it is planning to dispose of as part of a larger sale of assets, to cut its mounting debt pile.

IL&FS to sell waste-to-energy, water, cluster businesses

Mumbai-based infrastructure finance major IL&FS Group has identified about four-five non-core business verticals it is planning to dispose of as part of a larger sale of assets, to cut its mounting debt pile. Two of its listed subsidiaries, IL&FS Transportation Networks (ITNL) and IL&FS Engineering (IECCL) together accounted for a debt of about Rs 40,000 crore at the end of FY18.

According to sources, the company is selling off its its water and waste-water projects housed under its business vertical IL&FS Water (IWL), its waste-to-energy projects under IL&FS Environmental Infrastructure & Services (IEISL), and IL&FS Cluster Development Initiative, a company that focuses on sustainable solutions for micro, small and medium enterprises (MSME). The company may also sell off one of its three maritime assets housed under IL&FS Maritime Infrastructure Company (IMICL). Dighi Port, which does not come under IMICL, but was jointly developed by IL&FS and Balaji Infra Projects, is already facing bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC). Dighi Port runs a private port in Maharashtra’s Raigad district.

A senior official from ITNL, the roads development arm of IL&FS, told FE that of the 25 projects identified by the group for sale, ITNL and IL&FS Energy would account for about 20-22 projects. He added ITNL has received interest for 14 of its road projects with the National Investment and Infrastructure Fund (NIIF), Cube Highways and Lone Star Funds, all having submitted offers for both its toll-based and annuity road projects.

With IL&FS unable to service its debt and facing a spate of ratings downgrades in the last six months, the company was planning a fire sale of its assets. Due to a push by Life Insurance Corporation, its largest shareholder, the plan was abandoned with the state-run insurance giant putting up its own nominee as the non-executive chairman of the board and opting for a gradual sale of assets, spread out over a year to 18 months. According to sources, this will help IL&FS to generate maximum value from the sale of its assets which would not have been possible in case of a fire sale.

The group has already announced a Rs 4,500 crore rights issue for its parent company IL&FS and a Rs 3,000 crore rights issue for its subsidiary ITNL. The parent company will subscribe to 73%, or about Rs 2,000 crore of the rights issue by ITNL either by way of debt conversion or cash infusion. The money raised will be used to recapitalise various business verticals that are currently struggling under debt or facing liquidity issues.

LIC owns 25.3% stake in IL&FS, followed by Japan’s Orix Corporation (23.5%), Abu Dhabi Investment Authority (12.56%), HDFC (9%), Central Bank of India (7.67%) and State Bank of India (6.4%).

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