After key shareholders, IL&FS approaches government for bailout: Reports

Financially troubled infrastructure financing group IL&FS has reportedly sought the Central government's intervention as it faces mounting pressure to meet its short-term debt obligations and avoid a possible default.

Reports on Monday said the company approached the Finance Ministry after its key institutional stakeholders, including state-run Life Insurance Corporation (LIC), declined to provide a proposed Rs 3,000 crore loan facility. The funds were reportedly sought to meet Commercial Paper (CP) obligations and prevent a possible downgrade in the company's credit ratings.

LIC is the largest shareholder in IL&FS, holding a 25.34 per cent stake, while state-owned State Bank of India (SBI) owns 6.42 per cent. Both institutions come under the Department of Financial Services (DFS).

According to the reports, the Finance Ministry has not favoured the proposal put forward by IL&FS to address its immediate funding requirements. The Ministry did not respond to queries from IANS on the matter.

The developments come as IL&FS attempts to raise fresh capital and reduce its substantial debt burden. On August 29, the company's board approved a rights issue of 30 crore equity shares at Rs 150 each, which would raise Rs 4,500 crore. The company had said the process was expected to be completed by October 30.

IL&FS said its net worth stood at around Rs 7,400 crore as of March 31, 2018. The board also approved a recapitalisation programme of up to Rs 5,000 crore for key group companies, including IL&FS Financial Services, IL&FS Transportation, IL&FS Energy, IL&FS Environment and IL&FS Education.

Alongside the capital-raising measures, the group announced plans to sell selected assets and projects to bring down its overall debt by around Rs 30,000 crore. Of 25 projects identified for potential sale, the company said firm offers had already been received for 14.

IL&FS expected to complete the divestment programme over 12 to 18 months, with the proceeds intended to strengthen its finances and meet its commitments.

The scale of the problem was significant, with the group carrying debt of around Rs 1 lakh crore across its various entities. Any failure to meet near-term obligations could therefore have implications beyond IL&FS, given the group's extensive links with banks, financial institutions and infrastructure projects.

IL&FS was incorporated in 1987 and was initially promoted by Central Bank of India, Housing Development Finance Corporation and Unit Trust of India. Over the years, its shareholder base expanded to include major institutional investors such as LIC, SBI, Japan's ORIX Corporation and the Abu Dhabi Investment Authority.

As of March 31, 2018, ORIX Corporation held a 23.54 per cent stake, followed by ADIA with 12.56 per cent, HDFC with 9.02 per cent, Central Bank of India with 7.67 per cent and SBI with 6.42 per cent.

The crisis placed IL&FS at a critical juncture, with the success of its rights issue, asset sales and other fundraising measures becoming crucial to restoring liquidity and preventing the financial stress from spreading across the wider financial system.