Mumbai: Abu Dhabi Investment Authority (ADIA) and Japan’s Orix Corp. are in talks to acquire a controlling stake in Infrastructure Leasing and Financial Services Ltd (IL&FS), two people aware of the development said.

According to the people mentioned above, who spoke on condition of anonymity, ADIA and Orix could raise their combined shareholding to 75% from 36.1% if the proposed transaction goes through, subject to approval from other shareholders. It is one of the several options, subject to final valuation and terms of agreement, IL&FS is exploring to tide over its current financial crisis triggered by the defaults in debt repayment since June, they added.

IL&FS, which operates several subsidiaries and runs a diverse range of businesses, is primarily focused on the infrastructure sector. The group has been in the midst of a financial turmoil following a 450 crore default on inter-corporate deposits in June.

“The funds will go towards managing the short-term liquidity crisis," said the first person cited above. “The equity infusion will provide IL&FS some breather, while it looks to explore other options to raise more money."

“Fresh issuance of equity to ADIA and Orix are among the various options IL&FS is exploring to raise funds. It is also considering issuance of preference shares and non-convertible debentures (NCD) apart from the planned sale of assets at various group subsidiaries," he added.

When contacted, an ADIA spokesperson declined to comment. Email queries to Hari Sankaran, vice chairman and managing director, IL&FS, and to an Orix Corp. spokesperson remained unanswered until press time.

Mint reported on 19 September that key IL&FS shareholders have asked the company’s management to table a comprehensive turnaround and deleveraging plan, before talks of a potential bailout can be initiated.

Several assets—including several completed projects of IL&FS Maritime Infrastructure Co. Ltd (IMICL), land parcels held by Hill County Properties Ltd (HCPL), stake in IL&FS Securities Services Ltd and certain assets of IL&FS Transportation Networks Ltd— may be put on the block over the next six months, Mint reported citing people aware of the matter.

A 21 September Mint report said IL&FS has mandated SBI Capital Ltd to sell a majority stake in its financial services unit and additional assets for 4,500 crore to pay down debts and meet its obligations to avoid bankruptcy.

Founded in 1987 as an infrastructure development and finance company, IL&FS was promoted by the Central Bank of India (CBI), Housing Development Finance Corp. and Unit Trust of India (UTI).

Currently, its institutional shareholders include the State Bank of India (SBI), Life Insurance Corp. of India ( LIC), Orix Corp. and Abu Dhabi Investment Authority.

LIC is the largest shareholder with 25.34%, while HDFC has 9.02%, CBI holds 7.67% and SBI has a 6.42% stake. Orix Corp. of Japan and Abu Dhabi Investment Authority have stakes of 23.54% and 12.56%, respectively. Orix Corp., which has first invested in IL&FS in 1993, also owns a 49% stake in the company’s renewable energy business. In August, the board of IL&FS approved a rights issue of 30 crore equity shares at 150 per share aggregating to 4,500 crore, which the company said will be completed by 30 October. In August, the board also approved the recapitalization of group companies to the extent of 5,000 crore in IL&FS Financial Services, IL&FS Transportation, IL&FS Energy, IL&FS Environment, and IL&FS Education.

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