IL&FS board looks to divest more of its businesses

ksenia kondratieva Mumbai | Updated on December 04, 2018


Arpwood Capital and JM Financial appointed as joint financial and transaction advisors to assess the commercial feasibility of various options


IL&FS is likely to start divestment process for several more businesses of the group, including IL&FS Education, IL&FS Technologies, ONGC Tripura Power Company and IL&FS Paradip Refinery Water Ltd in the coming weeks, according to the second report submitted by debt-laden infrastructure finance major to NCLT on December 2.

The new board of IL&FS in the process of evaluating and initiating a few more divestments as the Group Level Resolution option, as significant capital infusion from investors has been found unlikely by financial advisors. The company’s new board had appointed Arpwood Capital and JM Financial Services as joint financial and transaction advisors (FTAs) to assist in assessing the commercial feasibility of various options for resolution of IL&FS’ ₹91,000 crore debt.

“Based on an outreach conducted by the FTA (to potential investors who could have the ability to undertake and execute such a transaction), the initial assessment seems to indicate that currently, the Group Level Resolution option is unlikely to materialise,” the report noted.

Hence, the new board would likely to resort to other strategies such as resolution at business vertical or platform level (for example, road, vertical, financial services vertical, renewable businesses) or at assets level (which would mean asset-be-asset resolution by means of capital infusion or monetisation or compromise with the creditors).

“Given that currently the Group Level Resolution option seems unlikely, the New Board is engaging with its advisors to assess the Vertical Level Resolution and Asset Level Resolution options (including a combination of both in some cases) keeping in mind a range of issues such as general economic and market conditions, market interest, maximisation of value and speed of execution, transaction certainty and stakeholder engagement,” the report said.

IL&FS new board has last month initiated divestment process for two financial subsidiaries, IL&FS Securities Services Ltd (ISSL) where it holds 82.4 per cent and wholly-owned subsidiary ISSL Settlement & Transaction Services Ltd (ISTSL).

The company has also issued “Expression of Interest” for its renewable business which mainly comprises of operational wind assets of over 873 MW capacity and under construction wind projects with aggregate capacity of 104 MW.

Road Business

The report noted that a significant majority of IL&FS’ various businesses in offshore jurisdiction are a part of its listed road arm IL&FS Transportation Networks Ltd (ITNL). The company has vast operations with multiple layers of subsidiaries both in India and abroad, including Spain, US, Africa, UAE, Singapore and China.

While IL&FS has been looking for buyers for some its road assets across India, it is also evaluating a variety of options for the overseas entities, the new board said in the report.

One of such entities is a Spain-based operations and maintenance company Elsamex with operations in Spain, Portugal, Latin America and Africa acquired by ITNL in 2008. According to the report, Elsamex has received an offer from a buyer of its stake in a joint venture holding a concession agreement for a road in Madrid. Also, Elsamex is negotiating with lenders for restructuring of its debt and for induction of a potential investor, the report noted.

Elsamex is also considering termination of two projects in Ethiopia. According to the report, there are various outstanding tax and salary payment dues in these projects. As BusinessLine reported earlier, several employees of the company are being held as hostages in this African country due to non-payment of dues to local contractors. IL&FS new board’s report, however, fails to mention this fact.

IL&FS is also considering divesting stake in IIPL USA LLC, its O&M subsidiary in the United States.

Published on December 04, 2018

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