LIC to the rescue of IL&FS as board approves funding plan
17 Sep 2018
The Centre’s cash cow Life Insurance Corporation of India (LIC) is to the rescue of another cash-strapped government enterprise, Infrastructure Leasing and Financial Services (IL&FS) with a Rs1,200-cr loan to help tide over its liquidity crisis.
The board of IL&FS, which also includes LIC, met on Saturday to discuss strategies to raise funds, including sale of assets.
LIC, IL&FS’s largest shareholder with a 25.34 per cent stake, is believed to have agreed to subscribe to the forthcoming rights issue and extend some immediate working capital loan.
LIC managing director Hemant Bhargava, who was also the non-executive chairman of ILFS, is reported to have stepped down from the position with immediate effect. He will, however, continue on the board as a director.
The board is also learnt to have appointed SB Mathur, a former chairman of LIC, as the new non-executive chairman.
Reports quoting sources said the company needs an immediate capital infusion of around Rs3,000 crore, adding that LIC will maintain its stake by subscribing to the rights issue.
IL&FS is looking to raise Rs4,500 crore through the rights issue in the next 12-18 months.
The company expects to complete the divestment plan over the next 12 to 18 months, as per a release issued on 29 August.
IL&FS hopes to reduce its overall debt by Rs30,000 crore by offloading some of its assets. The company has identified 25 projects for sale and has in fact received interest for 14, as per a notification.
The company is sitting on a debt pile of over Rs91,000 crore as of March 2018.
Key shareholders of the debt-laden company, including LIC, SBI and HDFC, had kept sale of some of its assets or non-core businesses as a pre-condition for raising funds, before any additional money could be pumped in.
Since the company has got some real estate assets, shareholders have asked it to liquidate them to generate cash.
There has been reports that it has even put on block its headquarters here for around Rs 1,300 crore.
According to IL&FS, the current situation of over-leverage and illiquidity had risen as a significant percentage of the groups liquidity, aggregating to over Rs16,000 crore, was stuck in claims and termination payments.
On September 4, it came to light that IL&FS defaulted on a short-term loan of Rs1,000 crore from SIDBI, while a subsidiary has also defaulted Rs500 crore dues to the development finance institution.