India's IL&FS To Sell Overseas Stakes, Including UAE

Infrastructure Leasing & Financial Services Limited (IL&FS) is planning to sell its stakes in the company's overseas ventures, offering respective foreign partners under the ‘first right of refusal’, a senior government official said.

IL&FS, the debt-ridden Indian infrastructure firm whose payment default triggered a major liquidity crunch in the Indian market October last year, is seeking to raise resources to settle its massive $13.2 billion liabilities, and among the ventures to be sold are its ventures in the UAE.

If IL&FS’s foreign partners decline to exercise their first right of refusal, it will sell off its stake in each of its foreign ventures in accordance with corporate insolvency guidelines in the respective countries where the ventures are registered, the senior official with the federal ministry of corporate affairs, told Arabian Business.

Abu Dhabi Investment Authority (ADIA) is the third largest shareholder in IL&FS, holding a 12.56 percent stake as per IL&FS’s 2018 annual report.

Life Insurance Corporation of India (LIC) and ORIX Corporation of Japan are the two largest stake holders of IL&FS, holding 25.34 percent and 23.54 percent equity each.

IL&FS Maritime Infrastructure Company Limited, Fujairah, ITNL International DMCC, Dubai, ITNL Infrastructure Developer LLC, Dubai and Sharjah General Services, Sharjah are among the six IL&FS ventures operating in UAE, according to the company’s 2018 annual report.

The infrastructure financing and project implementation major has 53 overseas companies out of its total 135 subsidiary companies, engaged in operations ranging from financial services, urban infrastructure, maritime infrastructure, road projects and technology.

Besides Middle East, IL&FS has operations in the US, Europe, South America and South East Asia.

After a management takeover by the Indian government through its corporate affairs ministry last October, IL&FS is currently in the process of selling off assets of its operating companies under the insolvency resolution process under IBC (Insolvency and Bankruptcy Code).

“Since IBC is not applicable to overseas ventures of Indian companies, IL&FS will offer its stake in these ventures to its foreign partners through the ‘first-right-of-refusal’ clause wherever it has foreign partners or will follow the insolvency guidelines in the respective countries where these ventures are operating,” the ministry official said.

Many of the overseas ventures have operating projects which are profitable and, therefore, could attract buyers at good valuations, the official said.

However, with the projected recovery through its assets sale to be much less than its total liability of over $13 billion, IL&FS’s shareholders are not expected to get anything out of the company’s stake sale proceeds in its various ventures, including the overseas ventures.

Among the major projects of various subsidiaries of IL&FS in UAE, the IL&FS Maritime Infrastructure-run Liquid Storage Tank Terminal, Fujairah has been successfully operating at about 90 percent average capacity, handling about 12.5 m cbm of cargo since its inception in 2015.

The Fujairah Terminal project was implementing a major expansion to double its capacity to better the revenues as well as the margins, when its parent company got into financial trouble in India late last year.

ITNL Infrastructure Developer LLC, another subsidiary of IL&FS, has been implementing a project of the Dubai Supreme Court Project, the first Private Finance Initiative Project in the transport infrastructure sector in that country, according to an IL&FS report.

The Dubai Supreme Court project involved developing 1,232 car parking spaces along with the ancillary retail and office space of approximately 300,000 Sq. ft. including the Supreme Court area on design, build, finance, operate and transfer basis with a concession period of 30 years.

Besides, IL&FS Financial Services Limited, the NBFC (non-banking financial company) arm of IL&FS, has its wholly-owned subsidiary based in Dubai – IL&FS Global Financial Services – which cater to the entire Middle East operations of the company.