(Source: IL&FS Annual Report)

RBI Calls For A Meeting With IL&FS Shareholders: BQ Exclusive

The Reserve Bank of India will meet with shareholders of Infrastructure Leasing and Financial Services Ltd. this week, as the group continues to default on its debt obligations.

The RBI has called for a meeting with shareholders of IL&FS on Sept. 28, two bankers with direct knowledge confirmed. The bankers, who spoke on conditions of anonymity, said that the meeting would be chaired by a deputy governor of the RBI.

The meeting will focus on the recent set of defaults reported at IL&FS and its subsidiaries. On the agenda is also a discussion on a capital infusion plan that the shareholders will take up on Sept. 29 at an annual general meeting of the company, said the people quoted above.

Life Insurance Corporation of India, with a 25.34 percent stake in IL&FS, is the largest shareholder in the company. Orix Corporate, Japan with a 23.54 percent stake is the second largest shareholder. The State Bank of India holds a 6.42 percent stake.

Emails were sent to the RBI and IL&FS on Sunday. The story will be updated with their response.

The banking regulator has already initiated a special audit of IL&FS after it failed to repay inter corporate deposits worth Rs 450 crore to Small Industries Development Bank of India. The defaults have continued through the month of September.

On Friday, IL&FS Financial Services informed stock exchanges that it had defaulted on Letter of Credit obligations to IDBI Bank. In another notification, the non-banking finance company said that its managing director and chief executive officer, Ramesh Bawa had resigned with immediate effect.

Both ICRA and Care Ratings have cut the ratings of the IL&FS Group’s debt instruments to as low as they can go. ICRA also cut its short-term and long-term borrowing programmes worth over Rs 12,000 crore to junk status.

“The liquidity profile of the group has been under pressure given the delays in fund raising as initially envisaged, deterioration in credit profile of key investee companies and the sizable repayment obligations at group level in the near term,” ICRA had earlier said in an emailed statement.

According to a plan approved by the IL&FS board on Aug. 29, the company will seek up to Rs 3,500 crore loans from State Bank of India and Life Insurance Corporation. The company also intends to raise Rs 4,500 crore by issuing fresh equity shares to its existing shareholders led by LIC.

To be sure, these plans have been approved by the IL&FS board, which comprises representatives from LIC as well as SBI. The investment committees of their respective boards are yet to clear the proposal. Final clarity is likely to emerge on Sept. 29, when the shareholders vote at an annual general meeting.

Aside from this, IL&FS and IL&FS Transportation Network Ltd. are already in the midst of an asset monetisation plan, for which they have appointed SBI Capital Markets Ltd. In an emailed response, a spokesperson for SBI Caps said that the investment banking firm had been appointed by ITNL to assess its roads portfolio and suggest a plan to resolve the stress in the company.

"SBI Caps has suggested that six projects could be terminated and another 10 operating projects could be sold," the spokesperson for SBI Caps said. According to the spokesperson, SBI Caps has also been contracted by IL&FS to find a buyer for selling majority stake in IL&FS Financial Services.