Tuesday, April 20

Strapped IL&FS may get a Rs 1,200-crore lifeline from LIC

MUMBAI: Life Insurance Corp. of India (LIC) may lend as much as Rs 1,200 crore to cash-strapped Infrastructure Leasing & Financial Services (IL&FS) to help tide over its liquidity crisis as the company’s board meets Saturday to discuss strategy and various other measures to sell assets and raise funds.

The non-banking finance company is looking to raise funds through a rights issue to shore up capital, reduce debt and recapitalise group companies.

“IL&FS has approached LIC for a Rs 1,000-1,200-crore loan,” said a person close to the development.

“LIC, which has over 25% stake in the company, is considering lending this amount and a decision will soon be taken by the investment committee. The terms will be decided after discussing the matter on the board and by the investment committee.”

The source added that LIC will maintain its stake by subscribing to the rights issue as well. IL&FS is looking to raise Rs 4,500 crore through the rights issue in the next 12-18 months.

It expects to reduce its overall debt by Rs 30,000 crore by offloading some of its assets. Out of a portfolio of 25 projects identified for sale, the company has received interest for 14, it has said in a notification.

On March 31, IL&FS had a net worth of Rs 7,400 crore. In addition, the board has approved re-capitalisation of Rs 5,000 crore in IL&FS Financial Services, IL&FS Transportation, IL&FS Energy, IL&FS Environment, and IL&FS Education.

On September 10, rating company Icra downgraded the nonconvertible debentures (NCDs) of IL&FS to BB from AA+ on higher levels of debt and the inability to raise funds as quickly as needed. The group has close to Rs 1lakh crore of debt on its books.

LIC and Japan’s Orix Corp. are the largest shareholders in IL&FS with stakes of 25.34% and 23.54%, respectively.

Earlier this week, Insurance Regulatory and Development Authority of India (Irdai) chairman SC Khuntia said that he expects insurers to follow prudent investment practices and, in case of a downgrade, retrieve the maximum possible and invest elsewhere.

Other investors in IL&FS include Abu Dhabi Investment Authority (ADIA) 12.56%, HDFC 9.02% and State Bank of India 6.42%.

ET reported September 13 that IL&FS will sell its corporate headquarters in Mumbai’s Bandra Kurla Complex (BKC) to raise funds as it seeks to stave off repayment challenges and switches to an asset-light strategy.

IL&FS recently defaulted on inter-corporate deposits and commercial paper to the tune of about Rs 450 crore, bringing it under Reserve Bank of India scrutiny besides being subjected to the rating downgrade.

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