Cash-strapped IL&FS may stop funding long term projects: Reports

IL&FS Transportation Networks | The company defaulted on the interest on non-convertible debentures due on August 25, 2020. (Image: Reuters)

Cash-starved IL&FS plans to focus on management and execution of infrastructure projects, and stop funding long term projects, the Business Standard  reports .

The company, which is facing a severe liquidity crunch, may put some of its assets for sale to pare debt, sources told the news daily. This may include some assets from the 28 build-operate-transfer (BOT) projects that are undertaken by its subsidiary IL&FS Transportation Networks (ITNL).

Read — Cash-strapped IL&FS in advanced talks with Atlantia to sell road assets for $1.2 bn: Report

According to the report, the company has been trying to move to engineering, procurement and construction (EPC) contracts from BOT contracts.

An EPC contract requires a company to design, engineer, procure materials for and construct the project, before handing it over to the end-user or owner.

IL&FS' board has made several attempts to sell the company, the news daily reported. Ajay Piramal had earlier offered to buy a majority stake in IL&FS, but the deal was dropped over differences in its valuation.

Similarly, the deal to sell ITNL to global private equity firm Lone Star did not materialise.

Also see: Opinion | IL&FS mess highlights the rot in infrastructure financing space

As on March 31, IL&FS' total outstanding debt stood at Rs 91,091.31 crore at the group level, with most of its operating assets owned by its subsidiaries. Around Rs 5,756 crore worth of debt is due for repayment over the next one year.

Nearly half of IL&FS' debt is because of various highway projects. The company is reportedly considering a proposal to appoint an international audit firm to validate a Rs 15,000 crore claim from the National Highways Authority of India (NHAI).

Read: Cash-strapped IL&FS may receive Rs 700 crore from NHAI soon: Report

The Reserve Bank of India (RBI) will meet the Life Insurance Corporation of India (LIC) on September 28 to chart out a course of action for the crisis-stricken IL&FS group. LIC is IL&FS' largest shareholder with a 25.34 percent stake.

IL&FS Financial Services has defaulted on seven debt repayments between September 12 and 27. The defaults were five bank loans, one deposit and one short-term deposit.

The company's credit rating has been downgraded from AAA to defaulting status after it failed to repay a Rs 1,000 crore short-term loan from Small Industries Development Bank of India (SIDBI).

Read: SIDBI may file a case against IL&FS for defaulting on its term repayment