The Infrastructure Leasing & Financial Services (IL&FS) board will meet on September 29 to discuss fund-raising plan
Life Insurance Corporation of India (LIC) managing director Hemant Bhargava has stepped down from the board of Infrastructure Leasing & Financial Services (IL&FS) with immediate effect. Sources told Moneycontrol that in its board meeting held on September 15, IL&FS was not able to arrive at a consensus on the fund-raising proposal. Former LIC chairman SB Mathur has been appointed as the non-executive chairman.
IL&FS will once again present this proposal for approval during its annual general meeting on September 29. The infrastructure financing major was looking to raise Rs 3,000 crore of funds on an immediate basis to meet its cash needs.
Sources told Moneycontrol that Bhargava stepped down from the non-executive chairman position to avoid a potential conflict of interest. IL&FS was looking for upto Rs 800 crore from LIC.
Mathur, who was earlier an independent director on the IL&FS board, has been a veteran in the insurance industry and was also heading the Life Insurance Council after retiring from LIC.
"Since LIC's investment into IL&FS was being discussed, it was imperative that an independent chairman preside over the matter," said an official who attended the meeting.
At the meeting held on September 15, the credit rating downgrade was discussed but no concrete plan for debt reduction was given. With the absence of a roadmap, LIC was not ready to offer financial assistance.
On September 10, rating agencies ICRA and CARE downgraded non-convertible debentures (NCDs) of IL&FS to BB from AA+. ICRA said the downgrade reflects rising pressure on liquidity at the group level due to sizeable repayment obligations. ICRA also downgraded the short-term rating for a Rs 40 billion commercial paper programme of IL&FS Financial Services, a subsidiary of IL&FS, to 'A4' from 'A1+'.
Last week, IL&FS Financial had informed exchanges that the company would not be able to issue any commercial papers till February 28, as it had defaulted on payments on two papers, due to mature on August 28 and August 30. In a letter to its employees, IL&FS has claimed that if funds worth Rs 16,000 crore stuck with concession authorities were released on time, it would not have landed in this mess.
LIC is the largest shareholder in IL&FS with 25.34 percent stake as on March 31, 2018. According to insurance regulatory rules, an insurance company cannot have more than 15 percent stake in a single entity, but can seek IRDAI exemption for specific transactions.