Investments in Infrastructure are at a dip with a serious crunch due to NPA’s and bad debt. Infrastructure Leasing and Financial Services (IL&FS) is one of many infrastructure focused companies that look for alternate sources of investments in this capital starved sector. Infrastructure funding through the bond markets has also been tough since not many infrastructure developers have high credit ratings. Since infrastructure makes up for most of the stressed advances by banks many of these companies turn to alternate sources and instruments like NCD for raising capital. Nexensus explores how Infrastructure Leasing and Financial Services (IL&FS) a significant player turns to alternate sources for capital.
Infrastructure Leasing & Financial Services Ltd (IL&FS)
Infrastructure Leasing & Financial Services Ltd (IL&FS) incorporated in 1987 is engaged in infrastructure development & financial services with focus on commercialization & creation of value added services. IL&FS identifies need-driven projects (e.g. roads, bridges, power, ports, water supply, area development etc.) that can be made commercially viable using innovative structural / financial techniques to enhance project viability. In 2015 the company clocked revenue of INR 14.30 billion and PAT of INR 3.04 billion.
Originally promoted by HDFC, UTI and Central Bank of India, today the company has over 500 shareholders and debenture holders with LIC India and Orix Corporation of Japan being the largest shareholders.
|Name||No. of Shares (Equity)||Category|
|Orix Corporation||35227509||Foreign Holdings|
|Life Insurance Corporation Of India||32541123||Government Company|
|Abu Dhabi Investment Authority||16129252||Foreign Holdings|
|Housing Development Finance Corporation Limited||11587194||Non-Nationalised banks|
|Vaibhav Ramprakash Kapoor||10559673||Individual|
|Central Bank Of India||9843386||Nationalised Bank|
|State Bank Of India||8237967||Nationalised Bank|
|Uti-Unit Linked Insurance Plan||1051111||Mutual Fund|
Capital Infusion: Bank Loans & Debentures (NCD)
IL&FS since 1994 has been issued over 369 bank loans, ~100 of which have were sanctioned by Central Bank of India and Centbank Financial Services Limited. Many have been serviced through consortium that include national banks like Punjab & Sind Bank, State Bank Of Bikaner & Jaipur, Jammu & Kashmir Bank Limited, Bank of Baroda, Karnataka Bank Ltd, Bank of Maharashtra, Syndicate Bank and South Indian Bank.
The company since 2006 has taken bank loans of almost INR 164.71 Billion and satisfied 9% of these loans amounting to INR 15 Billion. In 2015 alone IL&FS had raised loans worth INR 39.8 billion which accounts for 25% of the total bank loans raised in the last 10 years. However in 2016 the trend changed significantly as the company raised only INR 3 billion through bank loans.
Bank Loans taken by IL&FS
Recently, in the last 2 years IL&FS has chosen to raise a significant amount of capital by issuing non-convertible debentures (NCD’s). Since August,2014 the company has raised INR 34.35 Billion through this route from 138 Pension Funds, Insurance Companies, Provident Funds and Trusts.
Debentures (NCD) Issued to Pension Funds, Provident Funds & Insurance Companies
Almost 20 pension funds, 20 Provident Funds & 40 insurance companies have been issued NCD’s to get investment into the company.
|Pension Fund||Total Amount Paid (INR)||Debentures Allotted||Per Debenture Value (INR)|
|Sbi Employees Pension Fund||1,500,000,000||1500000||1000|
|Nps Pension Trust (LIC & UTI)||1,740,000,000||1,740,000||1000|
|United India Insurance Company (Employees) Pension Fund||150,000,000||150000||1000|
|Canara Bank Employees Pension Fund||100,000,000||100000||1000|
|Name||Total Amount Paid|
|SBI Employees Provident Fund||1,400,000,000|
|New India Assurance Company Ltd Staff Provident Fund||100,000,000|
|The Union Provident Fund||100,000,000|
|UTI AMC Pvt Ltd. Employees Provident Fund||50,000,000|
|Name||Total Amount Paid||Premium Value|
|Life Insurance Corporation of India||1,965,709,000||750.38|
|Army Group Insurance Fund||600,000,000||1000|
|HDFC Ergo General Insurance Company Limited||800,000,000||1000|
|The Oriental Insurance Company Ltd.||1,200,000,000||1000|
|Canara Hsbc Oriental Bank Of Commerce Life Insurance Company Limited||250,000,000||1000|
|Name||Total Amount Paid|
|Axis Bank Limited||2,000,000,000|
|UTI India Credit Opportunities Fund Limited||1,550,000,000|
|ICICI Securities Primary Dealership Ltd.||850,000,000|
|Russell Credit Limited||750,000,000|
|K Debt Opportunities Fund Limited||700,000,000|
IL&FS is engaged in multiple Public-Private-Partnerships (PPP) and Government tie ups for development of projects including ports, hydro-power stations, rural roads, water & waste water treatment plants, construction & engineering, infrastructure development projects and urban development. Some of their recent projects include-
It seems that even though there exists need for capital banks will continue to lose credit to other players while they struggle with bad loans and high lending rates. More & more companies are turning to alternate options including Bonds and Debentures. IL&FS Financial Services Ltd (a subsidiary of IL&FS) has also raised investments by selling masala bonds (Indian Rupee denominated bonds issued offshore). In an attempt to provide some relief RBI in November 2015 eased ECB norms for the infrastructure sector, thereby allowing firms greater flexibility in raising overseas funds. As part of its revised guidelines, the regulator reduced maturity period for long term external commercial borrowings (ECBs) to minimum 3-5 years from 10 years. The relaxed provisions however did not have the desired effect as these borrowings had to be fully hedged, which made it expensive for companies to raise funds overseas.
The launch of a 40,000 crore investment fund by the Government of India NIIF (National Infrastructure Investment Funds) to attract investments from global pension and sovereign wealth funds for development of new and stalled infrastructure projects could not have come at a better time. This move will certainly help fix woes of this sector and could bode very well for the country’s infrastructure story.
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