Infrastructure Finance & Leasing Services, which is facing a severe cash crunch, along with 40 other group companies, filed an application with the Mumbai Bench of the National Company Law Tribunal (NCLT), seeking relief under Section 230 of the Companies Act. By moving NCLT, IL&FS can get more time to repay creditors.
Rights issue
IL&FS and some of its subsidiaries had defaulted on payments on a series of debt instruments this month and IL&FS was planning for a rights issue to raise funds. The company will seek shareholders’ approval on Saturday for the rights issue.
“IL&FS filed an application with the NCLT on September 24 seeking certain reliefs in connection with filing of a scheme of arrangement under Section 230 of the Companies Act, 2013, in respect of itself and 40 other group companies, which will be prepared in compliance with applicable law and subject to necessary consents of shareholders, creditors and board of directors of the relevant entities,” the company said in a filing with the exchanges.
Among the 40 companies are: IL&FS Financial Services, IL&FS Engineering and Construction Co., IL&FS Transportation Network Ltd., and Noida Toll Bridge Co. Ltd. Section 230 of the Companies Act gives power to compromise or make arrangements with creditors.
Meanwhile, V.K. Sharma, chairman, Life Insurance Corporation of India (LIC), told reporters that IL&FS would not be allowed to collapse. LIC is the largest shareholder of IL&FS with 25.34% stake, followed by Oxis Corporation of Japan which has 23.54%.
“We will ensure IL&FS does not collapse. We will not allow contagion to spread from IL&FS. All options are open (including raising stake in the company),” Mr. Sharma, whose comments came after meeting finance ministry officials in New Delhi, was quoted as saying. Shares of IL&FS group companies surged to 12% on Tuesday after LIC said it would not allow IL&FS to collapse.
