IL&FS plans to sell real estate assets, Gift City stake

By Beena Parmar

  • 02 Jan 2020
Credit: Reuters

Infrastructure Leasing & Financial Services Ltd (IL&FS) is planning to sell its real estate assets worth Rs 3,500 crore ($490.53 million) and also its stakes in Gujarat International Finance Tec-City (Gift City) valuing approximately Rs 1,200 crore ($168.19 million).

IL&FS board said it has received a binding bid for the Chinese road asset that will resolve nearly Rs 1,600 crore debt and additional Rs 980 crore towards equity value for the shareholding firm.

The board, in order to resolve another Rs 1,200 crore debt, got approval from Gujarat government to purchase IL&FS Group’s stake in Gift City.

Uday Kotak, chairman at IL&FS Ltd, said in a statement that measures taken by the new board would result in resolving half its total outstanding debt as on September 30, 2018. Kotak referred to IL&FS as a “test case” on a group-wide resolution of stressed assets.

GIFT project is being implemented by GIFTCL, which has been set up as a 50:50 Joint Venture (JV) company between the Government of Gujarat and IL&FS.

In addition, IL&FS has also received binding bids for ten road assets and five assets with a combined total debt of Rs 9,500 crore. These resolution proposals, as Kotak said, have been referred to respective creditor committees for the next steps. It is also setting up Infrastructure Investment Trust (InvIT) for nine road assets with a total financial debt of more than Rs 11,000 crore.

Earlier this year, it was reported that more than 30 suitors had shown expressions of interest for IL&FS Transportation Networks Ltd's (ITNL) domestic road business. ITNL is the biggest subsidiary of IL&FS and manages some of the group's most valuable assets such as road projects.

The troubled and complex infrastructure and financial group is in the midst of resolving its debt of about Rs 99,000 crore ($13.8 billion) and has been trying to sell several of its assets to repay its debt obligations after multiple defaults led to a major liquidity crunch in the non-banking financial sector.

IL&FS Group’s stake in seven wind power SPVs or special purpose vehicles have been sold for nearly Rs 4,300 crore covering 100% of entity-level debt and including the equity value of nearly Rs 590 crore.

Additionally, the company said its group-wide real estate assets with an estimated value of around Rs 3,500 crore are being sold.

In July, the board approved the sale of IL&FS Wind Energy Ltd to its existing Japan-based shareholder Orix Corp, which owns 49% stake in each of seven operating wind power units of IL&FS. 

In November, the firm got approval from its lenders to sell its majority holding in Schoolnet India Ltd (formerly known as IL&FS Education & Technology Service Ltd) to Career Point Publications Pvt. Ltd. (CPPPL).  

Sale of other assets in energy, transportation, waste management, technology, water, urban infrastructure verticals are also currently underway, the company added.

The resolution process is conducted under the guidelines of the resolution framework for the IL&FS Group submitted to the National Company Law Appellate Tribunal (NCLAT).

Kotak also added that more than 40 companies in the group were regularly servicing debt of nearly Rs 7,200 crore. The group reduced its wage bill by 48% and operating expenses by 42%, on an annualised basis, in the one year since October 31, 2018.