IL&FS: Institutions get a breather, board revamp to ease pressure on lenders

When asked about the fate of the restructuring plan formulated by the old IL&FS board, the official said, “The new board will review all the plans and proposals of the company announced at the AGM on Saturday. The new board will be able to instill confidence among all.”

According to the official, the institution will participate in the Rs 4,500 crore rights issue if everyone is participating. “We are very much part of the financial sector. We will do it if necessary,” the official who declined to be named said, when asked whether it will fund the company which made a series of defaults in the last one month.

“We are not promoters of the company. We are just investors. We never had any role in the running of the company,” the official said.

On September 25, IL&FS and its subsidiaries moved the National Company Law Tribunal (NCLT) Mumbai Bench seeking “certain reliefs” in connection with filing of a scheme of arrangement under Section 230 of the Companies Act. This was to seek immunity from the actions of the creditors and get moratorium on repayments.

Earlier, bankers had raised concern about the resolution plan by IL&FS. “If there’s a right issue, our decision will be based on the valuation and resolution plans. If a proposal comes to the board, we will examine the proposal on merit and take a call. We need to see the resolution plan,” SBI Chairman Rajnish Kumar said.

Life Insurance Corporation (LIC), with a 25.34 per cent stake, is the largest shareholder in IL&FS. Orix (23.54 per cent) is the second-largest shareholder. SBI holds around 6.42 per cent stake. None of the institutions made any concrete announcement about participating in the Rs 4,500 crore rights issue at the GAM of IL&FS on Saturday.

What has kept away other shareholders including Abu Dhabi Investment Authority (12.56 per cent) and HDFC (9.02 per cent) is the high rights issue price of Rs 150 per share being charged by a company that has defaulted on repayments, institutional sources said. The Chairman of the superseded IL&FS board was former LIC Chairman Sunil B Mathur.

IL&FS also did not confirm how and to what extent LIC, State Bank of India, or Japan’s Orix Corporation would bail out the group by participating in the IL&FS rights issue worth Rs 4,500 crore, or extend a short-term loan of Rs 3,500 crore to tide over immediate needs. LIC had on Friday said it would participate in the rights issue.