IL&FS invites Proposal for Selling Assets from Renewable Energy Business
Debt-laden Infrastructure Leasing & Financial Services (IL&FS) has initiated the process to sell its renewable energy business and has invited expression of interest (EoI) proposals from prospective buyers.
 
IL&FS's assets from the renewable energy business put on the block include, operating wind power generating plants with aggregate capacity of 873.5MW, and its under-construction wind power generating plants with aggregate capacity of 104MW. Its asset management services for the wind power generating plant, business division that carries out project development and implementation of wind power plants will also be sold.
 
IL&FS is also selling its businesses relating to project development and implementation of solar power generating plants and projects under development of approximately 300MW capacity solar power plants for corporates, the group said in a release.
 
As per the statement, the proposed stake sale may be carried out as a basket or individually or any combination.
 
"In order to ascertain market interest and to examine feasibility of maximisation of value in an orderly and transparent manner, the Board, acting on behalf of its relevant subsidiaries, has today initiated the process of exploring the sale of controlling stake(s) held by IL&FS Group in renewable energy assets or businesses...," the company said in the statement.
 
The decision is based on the report prepared by the new board of IL&FS which was submitted to the ministry of corporate affairs and, in turn, to the national company law tribunal (NCLT).
 
"As stated in the said report, it is the objective of the board to achieve, by one or more plan(s), the resolution of the IL&FS group through certain measures, including asset divestment," the statement said.
 
IL&FS's board has appointed Arpwood Capital Pvt Ltd and JM Financial Ltd as financial & transaction advisors, along with Alvarez & Marsal as resolution consultants.
 
Earlier this week, the debt-ridden group had said that it has received over a dozen EoI towards acquiring its stake in IL&FS Securities Services Ltd (ISSL) and ISSL Settlement and Transaction Services Ltd (ISTSL).
 
IL&FS had started the asset monetisation process a fortnight ago, towards developing a resolution plan for the IL&FS Group. The last date for receipt of EoI was 23 November 2018.
 
On 24th November, corporate affairs secretary Injeti Srinivas said that following an 'overwhelming response' to buy units of the debt-ridden company, State-appointed will soon put on sale another 8 to 10 subsidiaries.
 
IL&FS group had a debt of more than Rs91,000 crore at the end of March 2018.
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GIFT City: 9 Steps the Gujarat Government Should Take To Fix the Mess
In a damage-control exercise, which also helps reduce the magnitude of the IL&FS (Infrastructure Leasing & Financial Services) crisis, the Gujarat government has decided to step in and buy the 50% stake that the beleaguered company held in its prestigious GIFT City (Gujarat International Finance Tec-City) project. Gujarat chief minister (CM) Vijay Rupani revealed this in a series of interviews in Mumbai, to promote Gujarat as a business destination. 
 
Ironically, this smart city project to develop an international financial centre was first offered to Maharashtra as a concept, by financial expert DC Anjaria; but the state failed to respond. Narendra Modi, as the CM of Gujarat, snapped up the idea and got it going. 
 
GIFT City is located 12km  from Ahmedabad International Airport but has been making slow progress because of the mistake—in hindsight—of selecting IL&FS as an equal partner with the Gujarat Urban Development Company Limited (GUDCOL). 
 
The Rs70,000-crore project is a ‘smart’ city with high-quality physical infrastructure and includes an international financial services centre (IFSC) structured as special economic zone and global financial hub. 
 
While the CM admitted to an ‘in-principle’ decision to acquire the stake, it raises many issues. From the perspective of resolving the IL&FS mess, the big question is: What price will Gujarat pay for the 50% stake? That depends on several factors. 
 
If one were to go by the calculations of Mr Anjaria, who blew the whistle on the shocking gold-plating of this project, the Gujarat government could probably demand control of GIFT City without paying anything at all. 
 
Mr Anjaria reckons that IL&FS owes the government several thousand crores of rupees, even after IL&FS’s entities pocketed multiple fees and charges, in what has been its signature modus operandi. Also, the entire project is built on land that belongs to the people of Gujarat. Moneylife was the first to expose how the whole project was virtually a gift to IL&FS, in a one-sided deal.  
 
Since the issue is now before the bankruptcy court, Gujarat may have to cough up more money to acquire IL&FS’s stake. It will be a question of who else is interested (which is unlikely) and how it is pitched to the bankruptcy court and creditors of IL&FS. 
 
For instance, if Gujarat can show that it will salvage the project and make it viable again, most creditors will support the acquisition. The amount shelled out for acquiring the stake will be the cost of putting complicit bureaucrats in charge who did not protect the state’s interest. 
 
There has been a lot of action behind the scenes to make Gift City work. Last week, the Securities & Exchange Board of India (SEBI) permitted alternate investment funds (AIFs), such as private equity funds and venture funds, to operate out of Gift City’s IFSC. This will give it a boost; but new investors are unlikely to rush in, unless they see evidence of a genuine clean-up. Here is what the Gujarat government needs to do to make the GIFT City work:
 
1. It needs to start by separating infrastructure development (find a new partner to replace IL&FS) from IFSC. It should also take back control of some of the land rights and development rights that it has relinquished to IL&FS, before it finds a new partner.
 
2. If the IL&FS board could be sacked, one wonders what is stopping the Gujarat government from doing the same with the messed-up GIFT City’s as well as IFSC’s boards and put in place a transparent and credible management. This is especially important in view of some serious allegations made by Mr Anjaria in a public interest litigation (PIL), after being removed as independent director and head of GIFT City’s audit committee for refusing to ratify questionable decisions of the board.
 
3. If the Gujarat government intends to attract global investment, it needs to address the issues raised by Mr Anjaria’s PIL and persuade him to withdraw it and re-start on a clean slate.
 
4. Mr Anjaria has asked for an investigation into the Gift City’s contracts by the Serious Frauds Investigation Office (SFIO). While the Central government has addressed this by ordering a wide-ranging SFIO investigation into IL&FS, it has to demonstrate its seriousness by changing the Gift City management. The PIL has some serious charges, with evidence, against Dipesh Shah, chairman of IFSC, including falsification of minutes of meetings. Ajay Pandey, managing director of GIFT City, also remains in place in spite of the false and defamatory allegations made against Mr Anjaria in an advertorial in the Business Standard. (The newspaper later published a long rejoinder by Mr Anjaria). 
 
5. GIFT City and IFSC need to be brought under the ambit of the Comptroller and Auditor General (CAG) of India and the Right to Information Act (RTI), since there is a substantial investment by the state in terms of land value. This was deliberately obfuscated in the 50:50 joint venture (JV) with IL&FS. 
 
6. In May 2012, the state government received an extensive report from GIFT City’s audit committee, documenting irregularities and defaults by IL&FS’s entities. Subsequently, more facts and details have been provided to the government by gathering information under RTI. All these must be handed over to the SFIO for its investigation and action.  
 
Here are some details that were part of these submissions. 
 
7. IL&FS was initially sold 7.77 million sq ft of development rights at a discount to the price set by the board of directors for other investors. The value was estimated at Rs550 crore and 50% of the amount (or Rs225crore) had not been paid until 2016. This is a direct default of GIFT City to the state government. How IL&FS persuaded the government to sell its development rights, when it was already the promoter, manager and developer of the project, is itself an issue needs SFIO investigation, since it is a misappropriation of public funds.
 
8. GIFT City’s deal with the Gujarat government was that land would be leased to it at Re1/ acre for 99 years. The revenue department, through a formal resolution, had ensured that land-related profits will accrue to the state, if development rights granted by it were sold at a commercial price. Over 16 million sq ft of development rights have been sold by Gift City/IL&FS at commercial rates (over Rs5,000/sq ft), amounting to at least Rs8,000 crore. A part of this profit has to be returned to the Gujarat government. An RTI query reveals that this had not been paid at least until 2016, and is unlikely to have been paid afterwards, when IL&FS was already facing liquidity issues. 
 
9. As per the JV contract, GIFT City itself has to pay the Gujarat government 1% of the income from sale of development rights as a premium. Since the value of development rights sold are approximately Rs8,000 crore, payment of Rs80 crore or so is due; this has not been paid. 
 
Clearly, the acquisition of the IL&FS’s stake in Gift City is not as simple as it seems. The real challenge is to clean it up and demonstrate that this global smart city and international financial centre are viable propositions. Otherwise, it will only be a bailout of IL&FS paid for by the people of Gujarat. 
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COMMENTS

Liju Philip

3 weeks ago

Why is anyone surprised? This is exactly the kind of crony capitalism that was practised under modi when he was Gujarat's CM. Now he has bought the same business principle to the whole country. No wonder the mess we are in. Soon all the PSUs will be sold to modi's capitalist friends for a song and the public wealth will be gone to dust.

REPLY

VIVEK SINGH

In Reply to Liju Philip 2 weeks ago

Please don't spread you own propaganda under the guise of this article

Ramesh Poapt

3 weeks ago

superb!

IL&FS’s Indian Employees Held Hostage in Ethiopia over Non-payment of Salaries to Locals
A tragic turn of events has put seven employees of IL&FS in Ethiopia in danger due to non-payment by the company. In a tweet put out by Neeraj Raghuwanshi, it has come to light that employees, including himself, are being kept hostage by the local labour and staff for the past four days as they are unhappy over non-payment of creditors and their salaries. 
 
 
As we know in the continuing saga of the IL&FS mess, in order to cauterise the relentless hemorrhaging, majority of their foreign subsidiaries are being shut down.
 
Almost all international offices will essentially be shut down immediately as part of the new action plan which the Uday Kotak-helmed board will give to the court. It is to be expected that majority of the subsidiaries will be wound up while the rest are scaled down considerably. 
 
In 2016, IL&FS had won a Rs1,525 crore road contract in Ethiopia by submitting its winning bid to the Ethiopian Roads Authority. At that time, the Authority had awarded IL&FS a long-term contract for completing multiple road projects in Ethiopia for a period of eight years. We now know that IL&FS has run out of money to keep the project going and has been undergoing the process of shutting down its business in the country. Mr Raghuwanshi’s heartbreaking tweet now informs us that the company’s woes have quite literally become a dangerous situation for these seven stranded employees. Mr Kotak, who now heads the new board, has been alerted about the plight of the employees and has asked the ITNL board to look into the issue. The Ethiopian company is “one of the maze of foreign companies below ITNL”, said a top level source in the new management.
 
Apparently, this is also not the first time such a case has occurred with IL&FS Transportation. A few years back, there was a similar instance in Nagaland when employees’ lives were threatened by militants in the area. IL&FS Transportation was contracted for a mega project of constructing two-lane roads connecting various locations under the Special Accelerated Road Development Programme in the Northeast. This project was plagued by extortion from several different militant factions who successfully extorted several lakhs of rupees. There were instances when rebel groups took away the keys of all the excavators working in the area and demanded for huge sums of money for return of the keys. The project was delayed by several years and the company tried to lay the blame at the feet of the militant groups.
 
 
Not having received a satisfactory response from the company, Mr Raghuwanshi has resorted to putting out this tweet and tagging prime minister Narendra Modi, and his Cabinet colleagues Sushma Swaraj and Arun Jaitley and Mr Kotak, who is heading the debt-ridden group, to perhaps draw some attention to their misfortune. 
 
In a series of tweets, he has also posted a screenshot of an email that pleads for help, stating that the “local administrations (will) put us behind the bars or may local staff will kill us because of the company’s fault.” His message reiterates that the employees are only to blame for being loyal to the company and sticking out with this project to the end. 
 
From his mail, it seems that these stranded employees have met with the Ethiopian Road Authority who have suggested that they should first pay any outstanding salaries of the local labours only after which would they be able to take any action.
 
To their disappointment, even the Indian Embassy told them that this was “only the fault of you employees (of IL&FS), you did not complain earlier to take action, in emergency you people are complaining.” 
 
The Indian Embassy has apparently written to the management of the company and will take any action after receiving a response. 
 
It is sad to see that these employees are being caught in this mess in such a way that neither the Ethiopian Road Authority nor the Indian Embassy is able to provide any help. This dire turn of events has led Mr Raghuvanshi to send out such a cry for help.
 
Update: Moneylife has learnt that ITNL (Infrastructure Transportation Network Ltd), the publicly listed IL&FS subsidiary, is already aware of the problem and is in discussions with the Ethiopian side. We have further learnt that the Ethiopian project has been given some guarantees by Indian institutions and the board, and the Ethiopian Road Authority is in talks to invoke those guarantees and release Indian employees.
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