LIC, SBI and Orix likely to participate in IL&FS Rs4500-cr rights issue

"There is a rights issue, which is running and will be over by October-end. LIC, SBI, and Orix are going to subscribe to bulk of it. They are hoping to raise Rs4500 crore," reports quoting a shareholder who attended the IL&FS annual general meeting (AGM), said.

LIC, the largest shareholder in IL&FS with a 25.34 per cent stake, is the largest shareholder in IL&FS, followed by Orix Corporate with a 23.54 per cent stake.

Reports say while there is no certainty about the plans to refinance the infrastructure lender and no clarity on Rs3,500 crore credit line from SBI and LIC, the management is also looking at salary cuts and even lay-offs.

With no hope of retrieving lost money, investors are anxious about the way forward for IL&FS. It is the small shareholders that stand to lose the most and the management of IL&FS seems not bothered either.

The management doesn't want to sell assets at "stressed valuations", even though they have no sound solution to offer. Shareholders are now seeking a CBI probe into the matter.

Sources say IL&FS is reported to be looking to raise Rs12,000-16,000 crore from sale of assets of the transport business IL&FS Transportation Networks (ITNL) and at least 14 assets, including the headquarters, out of 25 have been “completed and are saleable”.

IL&FS has kept a timeline of 45 days to get the legal framework in place to a commitment to sell assets and is now working with the RBI and the government to get the legal framework in place.

"In today’s AGM, we addressed several issues that has been concerning shareholders. These issues revolved around to achieve normalcy of our operations, the elements of our strategy has three parts a) to have a successful rights issue to enable the company to recapitalise itself; b) to sell assets which we have built over last few decades to ensure value can be upstreamed and use to repay our creditors; c) to be able to get liquidity to repay our debtors till our asset sale cycle begins. These strategies are explained in some details to our shareholders," Hari Sankaran VC and MD, IL&FS said after the AGM.

IL&FS, an unlisted infrastructure lending giant with over 150 subsidiaries, has been making headlines of late for all the wrong reasons. The company’s debt was downgraded over the past few weeks for default of interest to its bondholders.

The finance company has defaulted on seven debt repayments between September 12 and 27. The defaults were five bank loans, one deposit, and one short-term deposit.

As on 31 March IL&FS' total outstanding debt stood at Rs91,091.31 crore at the group level, with most of its operating assets owned by its subsidiaries. Around Rs5,756 crore worth of debt is due for repayment over the next one year.