Infrastructure Leasing and Financial Services (IL&FS) is reportedly looking to sell a majority stake in its financial services unit, IL&FS Financial Services, as it looks to pare huge debt.
The debt-laden company has been hit by over-leverage and illiquidity, partly due to over Rs 16,000 crore stuck in claims and termination payments. Reports suggest, it has asked the government to clear its dues for the projects that it has completed. Calls and text sent to Vibhav Kapoor, group chief investment officer at IL&FS with regards to the reports remained unanswered.
Several credit rating agencies have already downgraded their ratings on the infrastructure lending giant, in the wake of the elevated debt levels. Its unit IL&FS Financial Services has also defaulted on payments on its commercial papers.
IL&FS Financial Services disclosed on September 6 that the commercial papers (CP), which were due on August 28, could not be paid on due date and were settled in full on August 31. The company will not be accessing the CP market till February next year, in compliance with the Reserve Bank of India's CP directions.
Earlier this week, the company further said that its CP due on September 14 could not be serviced in full on due date and were subsequently settled on September 15; the CP dated September 18 could also not be serviced.
Care Ratings recently revised its ratings on non-convertible debentures of IL&FS amounting to Rs 9,641 crore to D from BB and on CP amounting to Rs 2,500 crore to D from A4. Ratings on other debt instruments of IL&FS were also revised to D.
“The rating revision takes into account the recent instances of irregularities in servicing of debt by the company. The liquidity profile of the group continues to be under stress on account of delay in raising funds from the promoters’ and impending debt payments,” the ratings agency said this week.
To shore up the capital of IL&FS, the company's board on August 29, approved a rights issue aggregating to Rs 4,500 crore, which it says would be completed by October 30, 2018. It also has plans to cut debt by Rs 30,000 crore, and has identified 25 projects for sale. Kapoor had said earlier that firm had already been received offers for 14 projects and the divestment plan was expected to be completed in 12 to 18 months.
The board had also approved capitalisation of group companies—IL&FS Financial Services, IL&FS Transportation, IL&FS Energy, IL&FS Environment and IL&FS Education—to the tune of Rs 5,000 crore.
Care Ratings said the delay in fund raising and asset monetisation was hurting the company's liquidity profile.
“The deleveraging has taken longer than expected time, while uncertainty about the timely infusion of funds vis-a-vis impending debt payment obligations in the near term has severely impacted the liquidity profile of the company,” it said.
IL&FS is a large player in infrastructure development as well as financing space in the country. The company claims to have invested Rs 1,89,000 crore in various infrastructure projects. LIC is the largest shareholder in IL&FS holding around 25 per cent of the company.