Cash-strapped financial conglomerate Infrastructure Leasing and Financial Services (IL&FS) has ruled out the option of fresh equity infusion by investors in the company as suggested by the financial advisers appointed to find a potential buyer.
Three options were identified by the new board of IL&FS for the resolution of the company, of which one was ‘group resolution’ at IL&FS level, which would involve ‘significant’ capital infusion from credible and financially strong investors.
In the second progress report on its resolution, IL&FS said based on an outreach conducted by the financial and transaction advisors, ‘the initial assessment seems to indicate that currently, the Group Level Resolution option is unlikely to materialise.’
The new board of IL&FS had appointed Arpwood Capital Private Limited and JM Financial Services Limited as joint financial and transaction advisers to assist in assessing the commercial feasibility of various options.
The new board is now engaging with the advisers on the other two options, that is, vertical-level and asset-level resolution option.
Business vertical-level resolution involves exploring the solutions of all assets, companies and SPVs comprising a specific business vertical, on a combined basis. Asset-level resolution, on the other hand, involves asset-by-asset solution explored through various methods, including capital infusion, asset monetisation and compromise with the creditors.
The second progress report also throws light on the challenges in the overseas operations, and says remittance of funds from India to offshore projects is a challenge.
IL&FS also disclosed that the Ethiopian Road Authority (ERA) had already terminated one project (Ambo Wolliso) and was threatening to terminate two more.
These projects are undertaken by Elsamex SA, a Spanish incorporated company specialising in operations and maintenance (O&M) acquired by IL&FS Transport Network Ltd (INTL) in 2008. ITNL is a subsidiary of IL&FS.
Elsamex was undertaking three output-based performance and rehabilitation contract (ORPC) projects in Ethiopia, in a joint venture with ITNL. The projects are Ambo Wolliso road upgradation, and OPRC Lot 1 and Lot 3.
“There are various outstanding tax and salary payment dues in these projects,” IL&FS said.
Some of the Indian workers in one of the projects in Ethiopia are held hostage by the local community there due to non-payment by Elsamex and IL&FS is now talking to the external affairs ministry and also the Indian embassy in Addis Ababa to resolve the issue.
IL&FS said Elsamex was engaged in negotiations with its lenders for restructuring the debt and/or induction of a potential investor.
However, in Botswana the situation is better for the company as both projects being executed are 82% and 68% done and is expected to be completed within the timeline.
IL&FS cautioned that in the current circumstances facing ITNL and the Group, remittance of funds from ITNL (India Operations) to offshore projects was a challenge under the regulatory and legal framework in force.
“The options for resolving offshore entities will be considered from among divestments, restructuring, closure, etc., in accordance with local jurisdiction regulations, and the most optimum resolution will be considered/arrived at on a case-to-case basis,” IL&FS said.
As a part of cost-cutting measures, some of the proposals like sale of non-core assets and office premises are being evaluated.
The group is also planning to cut down employee strength by 65%, which would reduce its wage bill by 50% (around ₹1,000 crore). The ‘manpower optimisation initiatives’ would be implemented in two phases, IL&FS said.
Meanwhile, IL&FS said it had appointed N. Sivaraman as group chief operating officer (COO). Mr. Sivaraman, who will be a part of the core operating committee and report to Vineet Nayyar, vice-chairman and managing director of IL&FS, will be responsible for day-to-day operations and provide hands on leadership and oversight to the group’s asset monetisation efforts, IL&FS said in a statement.
