The government-appointed board of directors of Infrastructure Leasing & Financial Services Ltd (IL&FS) board will update the National Company Law Tribunal (NCLT) on 31 October about the revival plan, after which it will seek consent from lenders and shareholders.

The board of directors of IL&FS led by Uday Kotak, managing director of Kotak Mahindra Bank, will finalize the information memorandum and the request for proposal (RFP) for auctioning the assets in consultation with the lenders and shareholders in three-four weeks after informing the tribunal of the revival scheme.

By December, bids will be invited for the assets, a government official privy to the development said on condition of anonymity. The issue of government superseding the board of IL&FS and its revival will be heard by the Mumbai bench of NCLT on Wednesday.

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The government and the IL&FS board are trying to keep the haircut that banks have to take on the 91,000 crore debt of IL&FS group to a minimum, said the official mentioned above.

The IL&FS board is expected to meet on Friday. “We want the haircut lenders may have to bear to be minimum. However, at this juncture, putting a definite value to the assets is very difficult," said the official.

For IL&FS, realizing maximum value for the assets will be a challenge and this is set to force lenders to tone down expectations from the asset sale. Fresh equity infusion by existing shareholders is unlikely, considering the past investments that have gone wrong.

It is not the best of times as far as asset sale in infrastructure is concerned, according to experts. “However, many IL&FS projects can perform better and could become financially sustainable after they change hands. The price they fetch may not be very high, but the sale will definitely go through and it will benefit the economy. The price of an asset, after all, is a matter of theory," said an infrastructure expert on condition of anonymity.

The broad turnaround plan includes monetizing certain assets and fixing the corporate governance and risk management gaps in the group while lenders may have to take a haircut depending on investor interest in the asset sale.

The government expects that lenders may go with the turnaround scheme designed by the state-appointed board of IL&FS, which it said is the best among the remedies available to lenders. The revival plan of the board will have the backing of the sovereign and could help in fetching better value for the assets compared to what lenders could monetize if they take over the assets by invoking the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI Act) of 2002. IL&FS Transportation Networks Limited (ITNL) holds 40% of the group’s assets in India and abroad.

The board has already reworked the financial controls in the group so that payments above a certain threshold are not made without the approval of the top management.

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