INSUBCONTINENT EXCLUSIVE:
By Anurag Joshi, George Smith Alexander and Saloni ShuklaInfrastructure Leasing Financial Services, an Indian shadow banker that defaulted
on more than five of its obligations since August, is trying to sell assets as payments on more debt becomes due in the next few months.
A
unit of ILFS, which has been categorized as a “systemically important” non-banking financial firm by the Reserve Bank of India,
re-designated its Chief Financial Officer Dilip Bhatia’s role and asked him to focus on selling assets, ILFS Transportation Networks said
ILFS Transportation manages 28 road and five other non-road projects, according to its annual report.
Investors are concerned that defaults
by ILFS, which has total debt of $12.6 billion -- 61 per cent in the form of loans from banks and other financial institutions -- could
spread to other shadow banks in Asia’s third-largest economy
The firm, which helped fund India’s longest highway tunnel, hasn’t been able to pay more than 4.9 billion rupees ($68 million) of its
obligations this year and has additional dues of about 2.2 billion rupees to be repaid by end of October, according to data compiled by
Bloomberg.
“Investors are wary about the credit issues more than liquidity issues,” said Rajesh Cheruvu, head of investment strategy at
Sanctum Wealth Management Pvt
“Some ILFS bonds are coming up for repayment over the next 10 days
The market is nervous over those papers
Matters could become messy if there are more corporate ratings downgrades
”
ILFS, which reported revenue of $2.6 billion in the year ended March 31, on Friday couldn’t make payments of 376.4 million rupees on
three non-convertible notes series with total outstanding of 4.5 billion rupees, according to data compiled by Bloomberg.
Investor concerns
about contagion spreading from the beleaguered company played out last week
India’s benchmark stock index SP BSE Sensex on Friday swung from a 1 per cent gain to a decline of as much as 3 per cent -- its wildest
intraday move in more than four years -- before closing with a 0.8 per cent loss
Dewan Housing Finance Corp
tumbled 43 per cent, while Indiabulls Real Estate dropped 13 per cent
The reason: DSP Mutual Fund sold Dewan Housing’s debt at a discount earlier in the week.
ILFS and its units are also losing its top
Five directors of its units ILFS Financial Services including its Managing Director Ramesh Bawa resigned, according to people familiar with
Bawa’s resignation was announced by the company in a filing on Friday.
Apart from roads, the company manages water, port and power
It has identified 25 projects that it wants to sell, DSP Mutual Fund said in a note to investors earlier this month.
“Investors are
awaiting concrete announcements on the sale of assets and infusion of liquidity from shareholders,” said Mahendra Jajoo, head of fixed
income at Mirae Asset Global Investment in Mumbai.
ILFS first defaulted on commercial paper, then on short-term borrowings known as
It has also failed to pay 4.5 billion rupees in ICDs to government-backed lender Small Industries Development Bank of India, people familiar
with the matter said earlier this month.
ILFS’s outstanding debentures and commercial paper accounted for 1 per cent and 2 per cent,
respectively of India’s domestic corporate debt market as of March 31, according to Moody’s Investor Services
Its bank loans made up about 0.5 per cent to 0.7 per cent of banking system loans, Moody’s said.
