IL&FS meet inconclusive, to reconvene on September 15

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Mumbai | Published: September 8, 2018 4:11:53 AM

The board of directors of Mumbai-based infrastructure finance major IL&FS decided to reconvene on September 15 after an emergency meeting on Friday did not prove conclusive.

il and fs, maharashtraWhile there was support from most shareholders, others criticised the management, citing erosion in the value of their shares.

The board of directors of Mumbai-based infrastructure finance major IL&FS decided to reconvene on September 15 after an emergency meeting on Friday did not prove conclusive.

According to sources, all the top shareholders of the group were not present as the meeting was called at a short notice, following group company IL&FS Transportation Networks’ (ITNL) annual general meeting (AGM) earlier this week in which the management came under fire from a section of minority shareholders.

While there was support from most shareholders, others criticised the management, citing erosion in the value of their shares. However, most shareholders also expressed their unwillingness to subscribe to the company’s proposed Rs 3,000-crore rights issue. ITNL’s shares are currently trading at Rs 30, down from Rs 242-258 at the time of its initial public offer (IPO) in March 2010. “The nomenclature is incorrect and the company should not be calling it a rights issue because we will be facing losses in any case. They may call it a private placement,” said a shareholder.

Some even questioned the wisdom of the rights issue. “The burden of debt is one thing, but the burden of equity must be thought through carefully,” said another.

IL&FS, 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, K Ramchand, MD, ITNL, had told FE earlier. The money raised will be used to recapitalise the group’s various business verticals that are currently struggling under debt or facing liquidity issues.

During the AGM, Ramchand explained the reasons for the company’s debt troubles, citing amounts stuck with the government in claims, inability to raise capital in a difficult environment and the difficulty of banks to finance projects. Ramchand also spoke of the difficulty in repatriating funds from China from the sale of its 49% stake with Chongqing Expressway Group (CEG). “It is very difficult and requires many approvals from the Chinese government to convert the money into Indian currency and take it out of that country,” Ramchand said.

He added that with the recovery of the amount stuck in claims, the planned asset sales of the parent company comprising 25 projects across its roads and energy portfolios as well as some of its revenue-generating business verticals, ITNL alone is looking to reduce its debt to about `2,000-3,000 crore in the next six-nine months.

Ramchand also said ITNL would exit the build-operate-transfer (BOT), or toll-based model and focus only on projects awarded under the engineering, procurement and construction (EPC) method, as it looks to prune its debt and focus on its core engineering competencies.

IL&FS Group owns 73% in ITNL and has announced a separate rights issue of Rs 4,500 crore with all its main shareholders — LIC, Orix of Japan, SBI, Abu Dhabi Investment Authority and HDFC — reportedly agreeing to participate in the rights issue.

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