India’s IL&FS seeks investor approval to sell equity, assets

Bloomberg

India’s troubled shadow bank Infrastructure Leasing & Financial Services Ltd., whose recent debt defaults sparked concern about contagion in the nation’s financial markets, has sought shareholder’s approval for a plan to revive the firm at the company’s annual general meeting on Saturday.
The management aims to bring the group back to normalcy by selling shares through a rights issue, paring assets to raise funds and by getting new credit lines to repay debt due soon, Hari Sankaran, managing director of IL&FS said in a statement after the meeting. Sankaran didn’t provide any further details of the plan.
The beleaguered group can raise 600 billion rupees ($8.3 billion) by selling assets, according to Chairman of its biggest shareholder and nation’s largest state life insurer, Life Insurance Corp. Rights offerings are often made by companies that need cash to meet upcoming obligations, and give existing shareholders the right to buy new shares.
IL&FS funds infrastructure projects across the world’s fastest-growing major economy and is considered to be systemically important by the central bank. Its defaults on commercial paper once considered rock-solid from August sparked concern among households holding mutual funds invested in such debt, and forced banks, mutual and pension fund managers to brace for further losses.
The fear added to pressures on borrowing costs for all companies in India’s credit markets, led to a slump in corporate bond issuance and sparked a brief but sharp sell-off in the stock market. There was also anguish that the group’s troubles could spread to other shadow banks and crimp Prime Minister Narendra Modi’s infrastructure plans before elections next year.
Investors in IL&FS also include Japan’s ORIX Corp., the second-largest shareholder in the company, and Housing Development Finance Corp.