A worker walks through a new tunnel. (Photographer: Simon Dawson/Bloomberg)

IL&FS Board To Meet Again On Sept. 15 To Seek Loans From LIC, SBI

The board of Infrastructure Leasing & Financial Services Ltd. has decided to meet again on Sept. 15 to seek approval for a Rs 3,000-crore loan from the Life Insurance Corporation of India and State Bank of India, two people in the know told BloombergQuint.

A meeting on Friday to discuss the same proposal remained inconclusive, the people said requesting anonymity. IL&FS and SBI didn’t respond to emailed queries. LIC Chairman VK Sharma didn’t respond to calls or text messages.

IL&FS is in the midst of a special audit by the Reserve Bank of India after the company failed to repay inter-corporate deposits worth Rs 350 crore to the Small Industries Development Bank of India. On Monday, the company defaulted on an additional Rs 100 crore repayment to SIDBI. This is in a series of such defaults which started on Aug. 27.

The loan from LIC and SBI is crucial for IL&FS, which is trying to prepare a resolution plan to repay SIDBI. The defaults had forced SIDBI to approach the RBI, seeking its intervention. As a core investment company, IL&FS falls under the central bank’s regulatory purview.

SIDBI has inter-corporate deposits worth Rs 500 crore with IL&FS and an additional deposit worth Rs 500 crore parked with its non-banking finance company arm, IL&FS Financial Services Ltd. The deposits parked with IL&FS Financial Services are due in November. An inter-corporate deposit is essentially an unsecured borrowing between corporates.

Also read: Wealth Managers With Exposure To Junk-Rated IL&FS And Its Subsidiaries

On Saturday evening, ICRA downgraded IL&FS by several notches to junk grade. It cited liquidity pressures building up within the organisation. In August, ICRA had downgraded the long-term rating on Rs 4,475 crore worth of IL&FS debt securities from AAA to AA+.

“The rating revision takes into account the company’s elevated debt levels owing to the funding commitments towards group ventures,” ICRA had said in its statement. The standalone ‘gearing’ (or long-term debt to equity ratio) rose to 3.08 times as of March 2018 compared with 2.60 times a year ago, it said.

LIC, with a 25.34 percent stake in IL&FS, is the largest shareholder in the company, followed by Orix Corporation of Japan, with a 23.54 percent holding. SBI holds 6.42 percent.

Also read: The Rise And Stumble Of IL&FS