New Delhi: The tentative turnaround scheme for Infrastructure Leasing & Financial Services Ltd (IL&FS) that its state-appointed board of directors will present to the Mumbai bench of the National Company Law Tribunal on Wednesday will focus on quick disposal of certain assets for which there are takers and leave projects that are servicing debt untouched. “The idea is to reach for the low-hanging fruit, ensure liquidity in the near term, improve market sentiment and aid the group’s revival with the government standing by the side,” a person informed about the board’s plan said on condition of anonymity.
IL&FS board to moot sale of assets
After the tribunal clears the scheme, the board of directors will seek the consent of lenders and shareholders for the asset sale. Fresh infusion of capital by existing shareholders is not expected to be part of the scheme. The focus of the turnaround scheme will be on the key subsidiaries of the group that account for the bulk of its operations. IL&FS Transportation Networks Limited (ITNL) is the group’s largest vertical and holds two-fifths of its assets. IL&FS Financial Services Limited (IFIN), a non-banking finance company, has about 14% of the group’s assets. Power generation and transmission are the other key areas the group has a presence in.
The board as well as the government expect that the lenders will agree to the scheme although it means them taking a haircut in the asset sale depending on the investor appetite for the road and power projects that are to be auctioned immediately. The group has a consolidated debt of Rs 91,000 crore. The board intends to invite bids for the assets by December, said the person quoted above.
Subsidiaries which are servicing their debt are unlikely to be covered in the sale programme.
The government expects that the board’s revival scheme will help achieve a turnaround without a bailout package at the expense of the taxpayer. “We are fixing the governance issues in the group. Government backing the revival scheme itself will help in realizing better value for the assets and improve confidence of stakeholders in the group. The market will eventually correct itself,” said a second person who is privy to the discussions on the board.
The investigation by the Serious Fraud Investigation Office (SFIO) into what went wrong in the group is focusing on how the finances of the important subsidiaries were managed. The probe is expected to hold the key managerial personnel of the important subsidiaries accountable for their failings.