The proposed rights issue of troubled Infrastructure Leasing and Financial Services (IL&FS) could be delayed as its new board of directors and shareholders address more immediate concerns.
“The rights issue will certainly happen, but the mood right now is to first understand what has been happening in the company and how to revamp at least some of the internal processes,” said two persons familiar with the development, adding that the issue could happen in a few months.
Sources said domestic investors such as State Bank of India and Life Insurance Corporation of India are ready to subscribe to the rights issue, but first want the new board to take stock of matters, including fund requirements and ways to monetise the company’s assets.
“A decision on how to infuse funds in the company and the proposed rights issue is likely to be taken by the end of the month, by which time a resolution plan will also be worked out,” said one of the persons close to the development.
Market volatility
Further, the current market volatility has raised a question mark on the prospects of an immediate share offering.
“The government’s active role in addressing the troubles at IL&FS indicates that any requirement for fund infusion at IL&FS will be met. The rights issue has to be timed properly,” noted the second person.
The National Company Law Appellate Tribunal had on Monday granted a moratorium on all creditor actions against the debt-laden group; this means it will not have to make any payments immediately.
IL&FS declined to respond to an email questionnaire from BusinessLine .
The earlier board of IL&FS had on August 29 approved a rights issue of 30 crore shares amounting to ₹4,500 crore. It was expected to be completed by October 30. However, since then a government-appointed board led by veteran banker Uday Kotak has taken over the company.
The board, which has met twice till now, imposed austerity measures on personnel and operating expenses and has recommended a full audit of the company’s standalone and consolidated accounts as on September 30, 2018.