New Delhi: After coming to the aid of bleeding IDBI Bank, insurance behemoth LIC is all set to bail out the debt-ridden Infrastructure Leasing & Financial Services (IL&FS).
Unlike the IDBI transaction, the deal with IL&FS involves foreign entities as Japan-based Orix Corporation (23.54 per cent) and Abu Dhabi Investment Authority (12.56 per cent) are two major stakeholders in IL&FS. Using general policyholders’ money for the rescue of foreign entities will for sure face many questions of propriety.
A source close to the development said, “The IDBI Bank at least is a public sector bank, but IL&FS is a private entity. It is astonishing that a public sector company (LIC) is being forced to bail out a private company.”
“It is not yet clear whether they will be bailing out IL&FS or bailing out foreign investors Orix and ADIA who own almost 36 per cent of its total shareholding pattern.”
According to sources, the IL&FS bailout would be one of the biggest for the insurer, as it would mean taking over a debt of Rs 65,000 crore. The infrastructure firm has been trying to sell assets, refinance existing loans at the holding company and operating companies and trying to merge the group with rivals.
As on March 31, 2018, LIC was the biggest stakeholder in IL&FS, with 25.34 per cent equity. Over the years, IL&FS has inducted institutional shareholders, including State Bank of India (6.42 per cent), Orix Corporation of Japan (23.54 per cent), Abu Dhabi Investment Authority or ADIA (12.56 per cent), ILFS Employees Trust (12 per cent), HDFC (9.02 per cent), Central Bank (7.67 per cent) and others (3.45 per cent).
Sources said LIC may infuse capital into the firm as part of the bailout package. As per media reports, the board of the firm recently approved a plan for an Rs 4,500-crore rights issue and liquidity support of Rs 3,500 crore.
Last month, Ravi Parthasarthy had resigned from IL&FS as non-executive chairman. The board of IL&FS had then unanimously appointed LIC managing director Hemant Bhargava as its new non-executive chairman with immediate effect.
LIC recently shelled out Rs 13,000 crore to buy 51 per cent stake in IDBI. In the past too, LIC was used by governments to bailout public issues of companies and disinvestment plan that fails to attract investor interest.