Crisis-hit Infrastructure Leasing and Financial Services (IL&FS) has devised a three-pronged strategy to tide over the current liquidity crunch that includes a rights issue, asset sale and addressing liquidity issues in the short term.
The board of the company has also decided go in for a comprehensive restructuring of the group and hire an agency for the purpose.
At its annual general meeting on Saturday in which shareholders approval was sought for the rights issue, the company explained the strategy to investors and sought their support.
LIC is the largest shareholder of IL&FS with 25.34% stake, followed by Oxis Corporation of Japan which holds 23.54%.
“In today’s [Saturday] AGM, we addressed several issues that have been concerning shareholders,” Hari Sankaran, VC and MD, IL&FS, said after the AGM.
“These issues revolved around achieving normalcy of our operations.
“The elements of our strategy has three parts, one to have a successful rights issue to enable the company to recapitalise itself, two, to sell assets which we have built over last few decades to ensure value can be upstreamed and use [the funds] to repay our creditors; and the third, to be able to get liquidity till our asset sale cycle begins,” Mr. Sankaran said.
Selling non-core assets is one option to tide over the short-term liquidity needs.
Recapitalise arms
IL&FS is planning to raise ₹4,500 crore through a rights issue in which it will be issuing 30 crore equity shares at ₹150 per share.
The board had also approved a ₹5,000-crore recapitalisation of group companies IL&FS Financial Services, IL&FS Transportation, IL&FS Energy, IL&FS Environment and IL&FS Education.
Seeking investor support
“These strategies are explained in some detail to our shareholders,” Mr. Sankaran said adding that he sought shareholders support for their proposal.
“I also thank them for their support that they have historically given us and we are hopeful we will be able to meet their expectation,” he said. IL&FS plans to complete the rights issue by the end of October.
Mr. Sankaran further said the board, which met on Saturday, decided to go in for a comprehensive restructuring by a specialist agency.
“In the meeting of board of directors of IL&FS today, we took four important decisions. One, we will develop a comprehensive, detailed plan for the restructuring of the group in order to be able to demonstrate to creditors and shareholders that the intrinsic value of the group was sufficient in repaying its liabilities.
“Two, we agreed to appoint a specialist agency to take this plan forward. As part of their scope of their work, they develop the plan, seek approval of the board as well as all stakeholders and then proceed to implement it,” Mr. Sankaran said.
He further added that IL&FS would continue to pursue its application to the National Company Law Tribunal (NCLT) for a moratorium on payments to its creditors.
“Three, we will continue to pursue our application of the Section 230 of the Companies Act to ensure we have the moratorium that we require to detail out the plans in a manner in which will satisfy creditors and shareholders with our capacity to service debt and equity.
“And finally to actually implement the asset monetisation plan in manner which is consistent with the comprehensive restructuring plan,” Mr. Sankaran added.
