Debt-laden Infrastructure Leasing and Financial Services, one of the major infrastructure financing firms in the country, has decided to scrap the final dividend to its shareholders, at a time it is struggling to make interest payments on its debt instruments.
IL&FS is struggling with debts of Rs 91,000 crore. The company has defaulted on interest payments on its non-convertible debentures (NCD). In the board meeting on May 30, a final dividend of 60 per cent or Rs 6 per share had been recommended. However, in the board meeting on August 29, it was cut to 10 per cent or Re 1 per equity share. Now it is being fully scrapped after the debenture trustee Centbank Financial Services refused to grant permission to pay the dividend to shareholders in the wake of the defaults.
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“Pursuant to one of the covenants of the debenture trust deed, the company has to obtain prior consent of the debenture trustee i.e. Centbank Financial Services for declaration and distribution of dividend on equity shares. The debenture trustee...has not consented to the declaration and payment of dividend on equity shares,” the company said on Thursday.
Unable to get the required permission from Centbank, IL&FS has had to withdraw the agenda item with respect to dividend declaration in the notice of the annual general meeting, just two days before the actual AGM. The company's AGM is scheduled to be held on September 29.
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The company has invested Rs 1,89,000 crore in various infrastructure projects and therefore, its problems assume importance. The company defaulting on its debt instruments rang alarm bells among investors. Its key shareholders, including Life Insurance Corp of India (LIC), which holds nearly a fourth of IL&FS equity, and State Bank of India among others, are expected to bail out the company by infusing fresh funds, although, there is no confirmation on that front yet.
LIC has said IL&FS will not be allowed to collapse. SBI chairman Rajnish Kumar has said it will decide once a concrete proposal is received.
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The board of IL&FS has already approved a rights issue aggregating to Rs 4,500 crore, to shore up the capital. It also has plans to cut debt by Rs 30,000 crore, and has identified 25 projects for sale. 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.
