Moneycontrol
Last Updated : Sep 29, 2018 02:14 PM IST | Source: Moneycontrol.com

EXCLUSIVE | RBI raises concerns on IL&FS debt crisis in meeting with shareholders, LIC open to stake hike

Only LIC, Orix Corporation and Abu Dhabi Investment attended the meeting

M Saraswathy @maamitalks

The Reserve Bank of India (RBI) in a meeting with large shareholders of IL&FS on September 28 raised concerns about the ongoing debt crisis in the group. Among the shareholders, only Life Insurance Corporation of India (LIC), financial services group Orix Corporation and Abu Dhabi Investment attended the meeting.

Sources told Moneycontrol that the banking regulator took stock of the events at IL&FS and allied companies. “RBI was concerned about the defaults on the debt payments by the IL&FS group. Shareholders were asked about their views on the issue. However, no plan of action was suggested by RBI,” said an official.

In today's meeting, that went on for almost three hours, the central bank assessed the situation and sought the shareholder's opinion about how the situation could be better managed. This is the first such official meeting between the banking regulator and IL&FS shareholders.

Earlier, RBI had also initiated a special audit of IL&FS after it defaulted on its Rs 450-crore inter-corporate deposits (ICDs) raised from state-owned Small Industries Development Bank of India (SIDBI).

LIC is the largest shareholder in IL&FS with 25.34 percent. Sources said LIC is ready to support the stake hike in the infrastructure financing major. This was also stated to RBI. However, it comes with a caveat of the group giving a detailed plan of action on how they will bring down the debt.

IL&FS needs an immediate capital infusion of Rs 3,000 crore and is also planning a Rs 4,500 crore rights issue.

Apart from LIC, Japan’s Orix holds 23.54 percent stake in IL&FS while Abu Dhabi Investment holds 12.56 percent.

Other shareholders include Housing Development Finance Corporation (9.02 percent), Central Bank of India (7.67 percent) and State Bank of India (6.42 percent). However, these companies did not attend the meeting.

Moneycontrol had reported earlier that Central Bank of India was looking to sell its stake in IL&FS but will wait for the IL&FS annual general meeting (AGM) before taking a final decision.

IL&FS will have its AGM on September 29 when the infrastructure financing major will discuss the plans of debt reduction as well as fundraising.

IL&FS debt crisis

The first signs of trouble in the IL&FS group emerged in June when IL&FS defaulted on inter-corporate deposits and commercial papers (borrowings) worth about Rs 450 crore. Over the next two to three months, at least two rating agencies downgraded its long-term ratings.

IL&FS, which has missed more than five debt payments since August and has been downgraded by three rating agencies as a result, has filed an application with the National Company Law Tribunal (NCLT). The company has sought some ‘accommodations’ from NCLT for itself and 40 group units under the Companies Act.

Among the group companies, its financial services arm IL&FS Financial Services also defaulted on interest payment on commercial papers four times in September.

Further, IL&FS Financial Services also defaulted on seven debt repayments between September 12 and 27, the financial services arm of IL&FS informed the stock exchange.

IL&FS group has over Rs 91,000 crore in debt. A board meeting held on September 15 on raising capital by IL&FS was inconclusive, with Hemant Bhargava stepping down from the Chairman's post at IL&FS.
First Published on Sep 28, 2018 07:51 pm
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