IL&FS breathes on  LIC life support

Firm will not be allowed to collapse, all options open: Sharma

New Delhi : State-owned insurer LIC on Tuesday said it will not allow debt-ridden IL&FS to collapse and explore options to revive it. The Life Insurance Corporation (LIC) has the largest shareholding in IL&FS.

IL&FS Financial Services, a group company of IL&FS defaulted on one of its commercial paper (CP) issuances due for repayment on Monday. This was the third default by the company.

LIC Chairman V K Sharma, after a meeting at the finance ministry, assured that efforts are being made to keep IL&FS afloat. “We will ensure IL&FS does not collapse. We will not allow contagion to spread from IL&FS…All options are open (including raising stake in the company),” he said.

Shares of IL&FS group firms surged up to 12 per cent on Tuesday after the announcement.  The scrip of IL&FS Engineering and Construction Company soared 12.02 per cent and IL&FS Transportation Networks rose 5.74 per cent.  Shares of IL&FS Investment Managers, however, ended marginally down 0.13 per cent.

The infrastructure development and finance group has been facing liquidity issues for some time and had defaulted on a Rs 1,000-crore debt from Sidbi earlier this month. On September 14, it had again defaulted on a repayment of Rs 105 crore CPs and the next day, it had defaulted on Rs 80-crore inter-corporate deposits (ICDs).

Meanwhile, the finance ministry has maintained that IL&FS Group is independent of the government and the company needs to resolve its issues.

Although the government has no holding in the company, some of the state-owned financial firms, including LIC and SBI, are shareholders of the non-banking financial company (NBFC).

“IL&FS is independent of the government. It has independent board and shareholders. So, IL&FS needs to resolve its issues on its own and I think it is capable of doing it,” Economic Affairs Secretary Subhash Chandra Garg had said.

IL&FS is sitting on a debt pile of around Rs 91,000 crore and had been downgraded to junk status by rating agencies following the default. Of this, Rs 57,000 crore are bank loans alone, most of which are from state-run lenders. LIC is the largest shareholder with a fourth of the firm’s equity.

Arm’s rating downgraded

MUMBAI: In more troubles for the crippled IL&FS group, India Ratings on Tuesday downgraded the long-term issuer rating of a group company, IL&FS Environmental Infrastructure and Services (IEISL), and placed its ratings under watch. The agency has also downgraded the ratings of various debt instruments to ‘BB’. Rival rating agency Icra had last month junked the ratings of most of the group companies. The downgrade by India Ratings reflects a similar rating action on its parent IL&FS following the default on repayment of commercial papers.

“The recent developments at IL&FS will affect IEISL’s financial flexibility with regards to raising fresh Govt ‘closely’ monitoring crisis

NEW DELHI: The government is “closely” monitoring the situation arising out of the defaults by IL&FS Group, Finance Minister Arun Jaitley said Tuesday, amid jitters in financial markets over liquidity concerns. Banks have expressed confidence that they would continue to ensure adequate availability of liquidity in the various sectors of the economy, Jaitley said. On the IL&FS issue, he said the government is closely monitoring the situation.equity and debt,” the rating agency said in a note. IL&FS holds 97.54 per cent stake in IEISL and has provided equity and debt to it, giving financial flexibility in terms of repayment of debt and interest.

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