Road construction takes place near the IL&FS building in Mumbai. (Photographer: Abhijit Bhatlekar/Bloomberg News)

IL&FS Fundraising Plans May Have To Wait For At Least A Month

Any further fund raising by IL&FS may take at least a month, as its board needs to take shareholders’ approval to raise ceiling for debt and equity capital at the forthcoming annual general meeting on Sept. 29, said two people aware of the developments.

At Infrastructure Leasing & Financial Services Ltd.’s emergency board meeting held yesterday, the board approved appointment of Sunil Behari Mathur, former Life Insurance Corporation of India Chairman, as the non-executive chairman of the board. He replaced LIC Managing Director Hemant Bhargava, who stepped down from the post at the meeting. Bhargava is also the head of the investment committee of LIC, which owns 25 percent in IL&FS.

Decision on the fund raising was taken at the Aug. 29 board meeting, one of the persons cited above told BloombergQuint requesting anonymity. But all decisions on the quantum of equity raising and line of credit will only be taken after the Sept. 29 AGM, said the second person cited above. Once the approval is in place, the board will have to convene and decide the modalities of fund raising, which could take a few more weeks. The company can’t raise funds till the shareholders approve raising of authorised capital at the AGM, the person added.

The company is also looking to monetise some of its assets, including its headquarters situated in the Bandra Kurla Complex in Mumbai, said the second person cited above.

Banks and insurance companies have the largest exposure to IL&FS. Regulations require insurance companies to invest in at least AA rated securities. IL&FS has over Rs 16,500 crore of standalone debt and Rs 91,000 crore of consolidated debt.

The AGM Agenda

The Sept. 29 AGM agenda, according to the company website, includes:

  • Approve audited balance sheet and audited consolidated financial statement for the year 2017-18.
  • Re-appointment of Hari Sankaran, PK Modi, Harukazu Yamaguchi and Kiyoshi Fushitani as nominee directors of the company.
  • To seek approval to raise secured and/or unsecured, listed and/or unlisted non-convertible debentures and/or subordinated debt instruments and/or other securities for an aggregate value of up to Rs 15,000 crore.
  • To seek approval to raise borrowing limits from Rs 25,000 crore to Rs 35,000 crore.
  • To seek approval to raise authorisation capital of the company from Rs 1,500 crore to Rs 1,600 crore and make necessary amendments to the Memorandum of Association and Article of Association of the company. The company proposes to increase the paid up equity shares from 40 crore shares to 50.45 crore shares.

Also read: Shareholders Ask IL&FS To Raise Funds By Selling Assets, Non-Core Business

The company also sought to amend its Article of Association to remove constraints on the shareholding percentage or ceiling for any shareholder. The existing AoA states that in case any shareholder's stake in the company crosses 25 percent of the equity share capital, the acquiring shareholder would have to purchase the remaining outstanding shares in the company at a price which is not lower than the fair value or purchase price of the shares.

The board in its Aug. 29 board meeting had approved raising up to Rs 5,000 crore in NCDs and rights issue. The increase in authorised capital and amendment to the AoA will allow IL&FS to raise equity and allow LIC to increase its stake in the company through the rights issue. Three ratings agencies: ICRA, India Ratings and Care Ratings, have downgraded IL&FS to non-investment grade. The company plans to raise up to Rs 4,500 crore through a rights issue and another Rs 3,500 crore in line of credit from existing investors LIC and SBI, the agencies said.

Also read: What’s At Risk For Insurers, Pension Funds After IL&FS Downgrade