Red sea: Ahead of AGM, IL&FS trips up

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Mumbai | Published: September 28, 2018 5:55:26 AM

Ahead of a possible meeting of the top shareholders of IL&FS with Reserve Bank of India (RBI) on Friday, the financier said on Thursday it has defaulted on several repayment obligations.

IL&FS, rbi, industryThe meeting with the RBI, if it takes place, is expected to discuss the course of action to be taken by IL&FS.

Ahead of a possible meeting of the top shareholders of IL&FS with Reserve Bank of India (RBI) on Friday, the financier said on Thursday it has defaulted on several repayment obligations. These include bank loans, term and short-term deposits, starting September 12, and totalling Rs 440.46 crore till date.

In a notice to the stock exchanges, IL&FS said that of the total defaulted amount, it defaulted on Rs 284.50 crore of bank loans including interest, Rs 103.53 crore of term deposits and Rs 52.43 crore of short-term deposits. In addition, IL&FS is behind payment on commercial paper worth approximately over Rs 500 crore over the last one month. A senior IL&FS official did not respond to emails seeking comments over this period. Several of the company’s borrowing programmes have been downgraded to non-investment grade or junk status as a result of the missed payments.

Ahead of IL&FS’ all-important annual general meeting (AGM) on September 29, FE understands the company has appointed Ernst & Young India to conduct a valuation exercise for the road assets it is looking to dispose in order to raise funds.

EY India did not respond to queries till the time of going to press.

The meeting with the RBI, if it takes place, is expected to discuss the course of action to be taken by IL&FS.

Meanwhile, IL&FS has mandated SBI Caps to look over its roads portfolio and devise a way to alleviate its severe liquidity crunch. SBI Caps is evaluating the company’s 28 road projects that come under IL&FS Transportation Networks (ITNL), IL&FS’ roads development subsidiary. The investment banker has suggested to IL&FS to terminate six of these projects and dispose of 10, a spokesperson for SBI Caps told FE. SBI Caps is also looking for an equity investor to buy into IL&S Financial Services, one of its unlisted subsidiaries.

At IL&FS’ AGM scheduled for Saturday, majority shareholder Life Insurance Corporation (LIC) is expected to extend the company some support to tide over its funds crunch. LIC chairman VK Sharma on Tuesday said the insurer wouldn’t allow IL&FS to collapse and hinted that it might increase its stake in the firm. It currently holds 25.3%. “We will be trying our best, so that it (IL&FS) doesn’t collapse…doesn’t create a contagion effect,” Sharma said. All options, including increasing LIC’s stake in IL&FS, were open, he said, adding that the action plan for the troubled infrastructure development and finance group would be clear by Friday. Speaking to the media later, finance minister Arun Jaitley said the government was closely monitoring the situation; he endorsed the LIC chief’s assurance but refused to elaborate on it.

According to the notice issued to shareholders ahead of the AGM, the agenda for the day includes approving the audited balance sheet and consolidated financial statement for FY18. IL&FS plans to seek shareholders’ approval to raise authorisation capital from Rs 1,500 crore to Rs 1,645 crore and make necessary amendments to its memorandum of association and articles of association. It will propose to increase the paid up equity shares from 40 crore shares to 50.45 crore shares. Further, IL&FS will seek approval to raise Rs 15,000 crore via commercial paper. Also on the the agenda, the company will seek to raise borrowing limits from Rs 25,000 crore to Rs 35,000 crore as well as reappoint Arun Saha as joint MD and CEO of the company. Hari Sankaran, PK Modi, Harukazu Yamaguchi and Kiyoshi Fushitani are also to be appointed as nominee directors of the company.

IL&FS’ outstanding borrowings are in the region of Rs 91, 000 crore, according to the company’s annual report, and approximately Rs 20,000 crore are understood to be due for repayment within a year. The company has total liabilities in excess of Rs 1 lakh crore. The crisis in the group is threatening to have a spillover effect on government-run lenders, as many of them have significant exposure to debt papers of IL&FS.

After LIC, Orix Corporation of Japan is the second largest shareholder of IL&FS with a 23.54% stake, followed by Abu Dhabi Investment Authority, HDFC, Central Bank of India and State Bank of India with 12.56%, 9.02%, 7.67%, and 6.42% each, respectively.

Shares of ITNL closed marginally lower on the BSE by 0.21% at Rs 23.35 each while IL&FS Engineering and Construction Company shares ended 0.35% lower at Rs 13.65 apiece. IL&FS Investment Managers, however, ended 0.26% higher at Rs 8.46.

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