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To turn the tide for IL&FS group, govt is planning asset sales

The immediate asset sale plan indicates that the equity infused by existing shareholders is not enough to get the IL&FS group back on its feet

To turn the tide for IL&FS group, govt is planning asset sales
To turn the tide for IL&FS group, govt is planning asset sales

New Delhi: In an attempt to turn around infrastructure lender IL&FS’ fortune, the government and the appointed board of directors of IL&FS have planned a series of quick asset sales in the next six months. The asset sale plan was finalized because the equity infused by existing shareholders was not enough to get the company back on its feet.

What IL&FS group is left with?

The group has assets across highways, toll bridges, power projects, and transmission networks and holds them through various special purpose vehicles, which allows quick valuation and sale when required. IL&FS Transportation Networks Limited (ITNL) holds 40 percent of the group’s assets in India and abroad. A few proposals for assets of the group have already come in and the board will take a call shortly, said a person familiar with the discussions amid the board of directors.

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Government’s cautious move

The government is moving with caution by avoiding an all-out witch hunt so as to not alarm the market because it could put investors on the backfoot and affect liquidity in the system. Instead, the government is choosing to pinpoint the weakness in the financial sector for correction as it looks into the failure of the IL&FS group. “We cannot spread an atmosphere of distress. It (resolving IL&FS bankruptcy) is a huge task. If you make a wrong move, you are jeopardising the outcome. There has to be a strategy,” said a government official, who asked not to be named. This does not mean that regulators will go soft, the official said. “The Serious Fraud Investigation Office (SFIO) and other agencies will not be trigger happy. They will do their work professionally,” the official said. In the aftermath of the IL&FS crisis, the financial system is now going through a much-needed series of bankruptcy resolutions, the success of which depends on investors coming forward with viable plans and bailing out failed projects. The government earlier this month superseded the board of directors of IL&FS and said an SFIO probe was on into the management failure in the company.

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