(Photographer: Anindito Mukherjee/Bloomberg)  

New IL&FS Board Claims Over A Dozen Buyers Interested In Two Subsidiaries

Even though a deal with IndusInd Bank fell through, the new board at the insolvent Infrastructure Leasing & Financial Services Ltd. claimed it received over a dozen offers for its two subsidiaries—IL&FS Securities Services and ISSL Settlement & Transaction Services.

The new government-appointed board, chaired by billionaire banker Uday Kotak, invited expressions of interest on Nov. 12 for stake sale in two companies that offer clearing services for equity and commodity derivatives. The qualifying bidders, selected from a mix of banks, private-equity firms and other financial services companies that showed their interest as of Nov. 23, will hereafter be invited to review information on the business and submit commercial bids.

Earlier, a deal with IndusInd Bank did not materialise as the IL&FS Group defaulted on debt payments multiple times, sparking fears of a contagion in India’s financial markets, a person with knowledge of the matter told BloombergQuint. The private-sector bank had signed a definitive agreement to acquire IL&FS Securities Services in July.

A strong response to the first leg of asset monetisation has spurred the board to launch the sale process of "many other assets as part of its ongoing resolution process", it said in a press statement on Nov. 26. The final transaction for sale of assets, and the resulting resolution plan(s) can be implemented only after it gets approved by the National Company Law Tribunal.

The IL&FS asset sale will be managed by Arpwood Capital and JM Financial—appointed as financial and transaction advisers—along with Alvarez & Marsal, the resolution consultant. The present stake sale would help the board in developing a turnaround plan for the IL&FS Group, which would be done through asset divestment or a combination of revival plans submitted to NCLT, the statement said.

The stake sale is part of the revival plan the new board got approved by the NCLT on Oct. 31, which included a three-tier resolution process—capital infusion at the group level, stake sale at the business vertical or platform level and third, through sale of its many assets. The conglomerate and its subsidiaries had defaults worth Rs 4,776 crore as of Oct. 8, including defaulted principal amounts and interest payments.

The Mumbai bench of NCLT allowed Ministry of Corporate Affairs to supersede the erstwhile IL&FS board on Oct. 1 to prepare a time-bound resolution plan for the group. The new board found that the group with a debt of about Rs 91,000 crore, is far more complex than expected with a maze of 347 subsidiaries and associate companies. The Serious Fraud Investigation Office is also investigating IL&FS and its subsidiaries amid concerns of financial irregularities.

Troubles at the group began intensifying since July, when founder Ravi Parthasarathy stepped down, citing health reasons. The defaults began in August, adding to pressure on corporate bond yields and sparking a selloff in the stock market. IL&FS’ investors include Life Insurance Corp., India’s largest life insurer; State Bank of India, its largest bank; and Housing Development Finance Corp, its largest mortgage lender. Japan’s Orix Corp. is the company’s second-largest shareholder.