Lone Star, I Squared Capital to buy out IL&FS’ stressed assets
IL&FS hopes to raise $2 billion from the sale of its assets
Mumbai: Infrastructure Leasing and Financial Services (IL&FS), the parent to a cluster of companies in various infrastructure verticals, hopes to raise $2 billion (or, Rs 10,000-12,000 crore) from the sale of its assets. These asset sales will mostly be to private equity-backed funds, a senior company executive at the debt-laden infrastructure lender said.
“The funds that are interested in our assets are I Squared Capital through its platform Cube Highways, US-based stressed asset specialist Lone Star, National Infrastructure Investment Fund, etc.”, K Ramchand, CEO, IL&FS, told Mint. “Some of them are looking at our assets, some are in the process of doing due diligence and we’ve received binding offers for 14 assets. We will close these transactions within the next quarter.”
Ramchand declined to name the assets but said these cover the gamut of their infrastructure portfolio, including transportation, energy, waste management and water management. “Some are within the listed entity and some are from the privately held businesses,” he added. Out of a portfolio of 25 projects identified for sale, firm offers have already been received for 14 projects. The company expects to complete its divestment of all 25 projects over the next 18 months.
Besides the asset sale, earlier this week, IL&FS announced that its board of directors had approved a rights issue of Rs 4,500 crore to shore up capital in its group entities. The company intends to issue 30 crore equity shares at Rs 150 each by October 30. Ramchand said IL&FS will raise another Rs 4,500 crore as borrowing from existing shareholders within the next one month.
The company’s net worth at the end of last fiscal was Rs 7,400 crore and consolidated debt across group companies stood at about Rs 80,000 crore.
The company said its situation of over-leverage and illiquidity had arisen as a significant percentage of the group’s liquidity, aggregating to over Rs 16,000 crores, was stuck in claims and termination payments with several government bodies, which would take two to three years more for payout.
As of March 2018, IL&FS had about 9 major shareholders, the biggest among whom are LIC, Orix Corporation Japan, Abu Dhabi Investment Authority and HDFC Ltd. Ramchand said that all major shareholders had expressed willingness to provide more capital, denying media reports that HDFC – which holds 9.02% - was unwilling to bring in more capital. “The only shareholder who won’t be able to subscribe to more capital is Central Bank of India, which is under PCA.” The bank came under the RBI’s prompt corrective action (PCA) framework in June, which restricts it from lending, hiring and expanding branches because of its bad loan burden. The bank holds 7.67% shareholder.
The board also approved the re-capitalisation of group companies to the extent of Rs 5,000 crore in IL&FS Financial Services, IL&FS Transportation, IL&FS Energy, IL&FS Environment and, IL&FS Education.
With these three moves - re-capitalisation, asset sale and unlocking pending payments - IL&FS hopes to rein in its leverage ratio and reduce overall debt by Rs 30,000 crore. Once this is done, the company said it will continue its work in the infrastructure sector, both as a sponsor manager and as an investment bank in mobilising and deploying money.
“As it stands, we will have enough capital we need for growth in the next 5 years,” Ramchand said. “If we need more, we will raise it as required.”