The board of directors of Infrastructure Leasing and Financial Services (IL&FS) has decided to sell the infrastructure-financiers' stake in IL&FS Securities Services (ISSL) and ISSL Settlement and Transaction Services (ISTSL). The two subsidiaries are engaged in professional clearing services & equity and other derivatives & commodities derivatives services, respectively, said a company spokesperson.
Arpwood Capital and JM Financial will act as financial and transaction advisors, while Alvarez and Marsal will act as resolution consultants for the board.
A statement from the board says that they are, "cognisant that these steps are required to advance the process for putting together resolution plan(s) for the IL&FS group, based on market interest and price discovery for various assets. Any binding transaction for the sale of assets, as well as the resulting resolution plan(s), will be subject to requisite approvals before the transactions are implemented."
IL&FS has an 81.24 per cent shareholding in ISSL, followed by IL&FS Employee Welfare Trust with nine per cent, Japan's ORIX Corporation with 4.75 per cent and Croupier Prive Mauritius with five per cent.
ALSO READ: Sebi asks rating agencies to explain failure in detecting IL&FS crisis
On October 1, the government took over IL&FS after it began defaulting on inter-corporate deposits, commercial papers, and other debt obligations. Thereafter, the National Company Law Tribunal (NCLT) reconstituted the board of the company, which found that IL&FS had 346 subsidiaries under its holding structure, it had borrowed over Rs 910 billion by the end of September 2018, and it was facing a liquidity problem of Rs 350 billion by the end of October.
Following the instructions of the NCLT, the board submitted a report on the 'progress and the way forward' for the beleaguered infrastructure financier on October 30, which outlined several steps that the board had taken within the first weeks to ensure a fruitful cleanup.
ALSO READ: IL&FS row: 50 top NBFCs need Rs 700 bn in Nov to redeem commercial papers
The IL&FS group owes around Rs 257.7 billion towards investments in non-convertible debentures by investors, commercial papers worth Rs 30.3 billion, around Rs 17 billion to non-banking financial companies, Rs 11 billion to corporates, Rs 91.4 billion to financial institutions, and Rs 60.3 billion to foreign banks, the report said.
As per the report, the board has introduced austerity measures within the company and for the present board henceforth, and against all previous board members and senior executives. It stated that the new board would undertake a review of all preferential actions that creditors of the company and its affiliates provided, including the appropriation of balances towards dues and loan repayment set-offs, for example.
ALSO READ: IL&FS crisis: IndusInd Bank moves NCLAT to recover interest of Rs 250 mn
Further, there would be full stand-alone and consolidated audit conducted for the six months ended September 2018 for IL&FS and certain group companies, in addition to a special audit of past management actions that have major commercial and governance implications.
The report also noted several governance problems about how IL&FS was run. For instance, despite the large corporate structure spanning industries and geographical territory, there is no central repository of bank accounts and that the data is stored in different formats and different systems across the IL&FS Group.
ALSO READ: IL&FS crisis: Did LIC violate Irdai guidelines while increasing its stake?
Since taking over the company, the new board has appointed members to the boards of eight key IL&FS companies, including IL&FS Financial Services, IL&FS Transportation Networks, IL&FS Environmental Infrastructure and Services, IL&FS Energy Development and IL&FS Engineering and Construction, to name a few.
It is also consulting with all relevant authorities and has requested entities such as the National Highway Authority of India and Ministry of Road Transport to settle claims filed by IL&FS' companies for concessions that the latter is due from the former.
ALSO READ: Best option is to sell IL&FS along with group firms: Corp affairs secy
The new board faces many challenges in driving an effective and fruitful resolution for the company, its creditors, and employees.
This includes how to consolidate and clean up the present structure with multiple layers and types of holding structures and interests across different sectors, that the resolution plans for overseas entities would be subject to the laws of foreign jurisdictions and that the new board faces a problem of getting reliable information as there are gaps in the data that could help with a resolution plan.
The NCLT in Mumbai is scheduled to hear the government's petition in the matter on December 3.
Arpwood Capital and JM Financial will act as financial and transaction advisors, while Alvarez and Marsal will act as resolution consultants for the board.
A statement from the board says that they are, "cognisant that these steps are required to advance the process for putting together resolution plan(s) for the IL&FS group, based on market interest and price discovery for various assets. Any binding transaction for the sale of assets, as well as the resulting resolution plan(s), will be subject to requisite approvals before the transactions are implemented."
IL&FS has an 81.24 per cent shareholding in ISSL, followed by IL&FS Employee Welfare Trust with nine per cent, Japan's ORIX Corporation with 4.75 per cent and Croupier Prive Mauritius with five per cent.
ALSO READ: Sebi asks rating agencies to explain failure in detecting IL&FS crisis
On October 1, the government took over IL&FS after it began defaulting on inter-corporate deposits, commercial papers, and other debt obligations. Thereafter, the National Company Law Tribunal (NCLT) reconstituted the board of the company, which found that IL&FS had 346 subsidiaries under its holding structure, it had borrowed over Rs 910 billion by the end of September 2018, and it was facing a liquidity problem of Rs 350 billion by the end of October.
Following the instructions of the NCLT, the board submitted a report on the 'progress and the way forward' for the beleaguered infrastructure financier on October 30, which outlined several steps that the board had taken within the first weeks to ensure a fruitful cleanup.
ALSO READ: IL&FS row: 50 top NBFCs need Rs 700 bn in Nov to redeem commercial papers
The IL&FS group owes around Rs 257.7 billion towards investments in non-convertible debentures by investors, commercial papers worth Rs 30.3 billion, around Rs 17 billion to non-banking financial companies, Rs 11 billion to corporates, Rs 91.4 billion to financial institutions, and Rs 60.3 billion to foreign banks, the report said.
As per the report, the board has introduced austerity measures within the company and for the present board henceforth, and against all previous board members and senior executives. It stated that the new board would undertake a review of all preferential actions that creditors of the company and its affiliates provided, including the appropriation of balances towards dues and loan repayment set-offs, for example.
ALSO READ: IL&FS crisis: IndusInd Bank moves NCLAT to recover interest of Rs 250 mn
Further, there would be full stand-alone and consolidated audit conducted for the six months ended September 2018 for IL&FS and certain group companies, in addition to a special audit of past management actions that have major commercial and governance implications.
The report also noted several governance problems about how IL&FS was run. For instance, despite the large corporate structure spanning industries and geographical territory, there is no central repository of bank accounts and that the data is stored in different formats and different systems across the IL&FS Group.
ALSO READ: IL&FS crisis: Did LIC violate Irdai guidelines while increasing its stake?
Since taking over the company, the new board has appointed members to the boards of eight key IL&FS companies, including IL&FS Financial Services, IL&FS Transportation Networks, IL&FS Environmental Infrastructure and Services, IL&FS Energy Development and IL&FS Engineering and Construction, to name a few.
It is also consulting with all relevant authorities and has requested entities such as the National Highway Authority of India and Ministry of Road Transport to settle claims filed by IL&FS' companies for concessions that the latter is due from the former.
ALSO READ: Best option is to sell IL&FS along with group firms: Corp affairs secy
The new board faces many challenges in driving an effective and fruitful resolution for the company, its creditors, and employees.
This includes how to consolidate and clean up the present structure with multiple layers and types of holding structures and interests across different sectors, that the resolution plans for overseas entities would be subject to the laws of foreign jurisdictions and that the new board faces a problem of getting reliable information as there are gaps in the data that could help with a resolution plan.
The NCLT in Mumbai is scheduled to hear the government's petition in the matter on December 3.
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