You are here: Home » Economy & Policy » News
Business Standard

IL&FS approaches NCLT against bankruptcy case, draws revival plan

Here's what you must know about the IL&FS crisis

Infrastructure Leasing & Financial Services Ltd (IL&FS) and its subsidiaries defaulted on repayment to lenders this month and the group is facing a severe liquidity crunch. The company, which helped fund India’s longest tunnel, defaulted on three non-convertible notes, and had a consolidated balance sheet size of Rs 1,158 billion at the end of 2017-18. The mounting troubles at IL&FS have shaken confidence in the sector and rocked India’s stock markets on Friday. Investors, jittery about the rare default in the nation’s money markets, sold shares of financial companies. The group has seen its various long-term and short-term borrowing programmes downgraded to 'default' or 'junk' grades by credit rating agencies, even as the regulators are also probing alleged delay in disclosure about certain loan defaults. Among others, capital markets regulator Sebi, the Reserve Bank of India (RBI), the corporate affairs ministry and the finance ministry have received complaints about alleged wrongdoings at IL&FS and its various group entities, including the listed ones. Here's what you must know about IL&FS crisis: * IL&FS group is reeling from a huge outstanding debt and planning to sell assets to raise funds. The conglomerate has a total debt of Rs 910 billion, of which Rs 570 billion is from PSU banks. * IL&FS first defaulted on commercial paper, and then on short-term borrowings known as inter-corporate deposits. It was also reported to have failed to pay Rs 4.5 billion ($62 million) in ICDs to government-backed lender Small Industries Development Bank of India (Sidbi). * The conglomerate’s various long-term and short-term borrowing programmes have been downgraded to “default” or “junk” grades by rating agencies. Icra downgraded the group twice in a fortnight. ALSO READ: Japan's Orix Corp keen to acquire a majority stake in crisis-hit IL&FS IL&FS shareholders LIC, with a 25.34 per cent stake in IL&FS, is the largest shareholder in the company. Orix Corporate, Japan with a 23.54 per cent stake is the second-largest shareholder. SBI holds a 6.42 per cent stake. What is the way ahead for IL&FS? * The immediate need is to restore confidence * Raise funds through assets sale * Avoid bankruptcy According to Bloomberg, IL&FS is seeking to raise more than Rs 300 billion ($4.2 billion) by selling assets for cutting debt. It plans to sell 25 assets and has received investor interest for 14 of them, according to a note sent to employees by Vice-Chairman and Managing Director Hari Sankaran. The company is satisfied with the valuation of the offers.

The government may facilitate the sale of IL&FS’ assets, according to a report by The Economic Times. Additionally, the RBI is said to have asked IL&FS shareholders to come up with a revival plan by Friday. * Seek Loan: According to a plan approved by the IL&FS board on August 29, the company will seek up to Rs 35 billion loans from State Bank of India (SBI) and Life Insurance Corporation (LIC). The company also intends to raise Rs 4.5 billion by issuing fresh equity shares to its existing shareholders led by LIC. The investment committees of their respective boards are yet to clear the proposal. Final clarity is likely to emerge on September 29. ALSO READ: IL&FS crisis: No concern over liquidity due to NBFCs, says SBI chairman * IL&FS may move NCLT against admitting bankruptcy case IL&FS is planning to approach the National Company Law Tribunal (NCLT) with a plea that a bankruptcy case against the group should not be admitted. The company will inform the tribunal that the group is already in the process of settling its dues through monetisation of IL&FS assets and through other capital-raising programmes, reported Livemint. IL&FS has appointed Cyril Amarchand Mangaldas as the counsel to approach the tribunal. RBI to meet with shareholders of IL&FS RBI has called for a meeting with shareholders of IL&FS Ltd on September 28. According to Bloomberg, the meeting would be chaired by a deputy governor of the RBI and will focus on the recent set of defaults reported at IL&FS and its subsidiaries. On the agenda is also a discussion on a capital infusion plan that the shareholders will take up on September 29 at an annual general meeting of the company. ALSO READ: IL&FS incident is unfortunate, says RBI director S Gurumurthy This week crucial for IL&FS The impact of IL&FS’ defaults will be known by the end of this week. IL&FS and its subsidiaries will have to shell out close to Rs 20 billion by next weekend (September-end) to meet financial liabilities. It has sought an immediate loan of Rs 35 billion from LIC and the State Bank of India to bail it out. If funds do not come by next weekend, it would default on its repayments, which would lead to a domino effect across the financial market, warn insiders. IL&FS has an outstanding debt of Rs 910 billion. India’s top mutual funds have invested in the debt instruments of IL&FS and its subsidiaries and they will have to clear debt of other companies to meet redemption pressure. add (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

MONTHLY STAR

Business Standard Digital

Business Standard Digital Monthly Subscription
149.00  
subscribe
Complete access to the premium product
Convenient – Pay as you go
Pay using Master/Visa Credit Card & ICICI VISA Debit Card
Auto renewed (subject to your card issuer’s permission)
Cancel any time in the future
Requires personal information

What you get?

ON BUSINESS STANDARD DIGITAL

  • Unlimited access to all the content on any device through browser or app.
  • Exclusive content, features, opinions and comment – hand-picked by our editors, just for you.
  • Pick 5 of your favourite companies. Get a daily email with all the news updates on them.
  • Track the industry of your choice with a daily newsletter specific to that industry.
  • Stay on top of your investments. Track stock prices in your portfolio.
  • 18 years of archival data.

NOTE :

  • The product is a monthly auto renewal product.
  • Cancellation Policy: You can cancel any time in the future without assigning any reasons, but 48 hours prior to your card being charged for renewal. We do not offer any refunds.
  • To cancel, communicate from your registered email id and send the email with the cancellation request to assist@bsmail.in. Include your contact number for speedy action. Requests mailed to any other ID will not be acknowledged or actioned upon.

SMART MONTHLY

Business Standard Digital

Business Standard Digital - 12 Months
1499.00
subscribe
Get 12 months of Business Standard digital access
Single Seamless Sign-up to Business Standard Digital
Convenient - Once a year payment
Pay using an instrument of your choice - Credit/Debit Cards, Net Banking, Payment Wallets accepted
Exclusive Invite to select Business Standard events

What you get

ON BUSINESS STANDARD DIGITAL

  • Unlimited access to all content on any device through browser or app.
  • Exclusive content, features, opinions and comment – hand-picked by our editors, just for you.
  • Pick 5 of your favourite companies. Get a daily email with all the news updates on them.
  • Track the industry of your choice with a daily newsletter specific to that industry.
  • Stay on top of your investments. Track stock prices in your portfolio.

NOTE :

  • This product is a monthly auto renewal product.
  • Cancellation Policy: You can cancel any time in the future without assigning any reasons, but 48 hours prior to your card being charged for renewal. We do not offer any refunds.
  • To cancel, communicate from your registered email id and send the mail with the request to assist@bsmail.in. Include your contact number for easy reference. Requests mailed to any other ID will not be acknowledged or actioned upon.
First Published: Mon, September 24 2018. 15:27 IST
RECOMMENDED FOR YOU