Massive sale of IL&FS Indian assets expected to generate high investor interest

The troubled firm's large portfolio includes more than 14,000 kilometers of roads, wind energy and solar plants and maritime and logistic assets.

The upcoming sale of assets from troubled Infrastructure Leasing & Financial Services, one of the main infrastructure developers and non-banking financial institutions in India, should attract bids from the major infrastructure investors in the country, three GPs from India told Infrastructure Investor.

“Everyone who is an infrastructure investor [in India] should be interested at a price,” one of the GPs said, speaking on condition of anonymity.

Another source singled out some of the biggest fund managers currently operating in the Indian infrastructure market, including Macquarie, Brookfield, I Squared Capital, Edelweiss and Lone Star, as potential bidders for the IL&FS assets.

The above-mentioned companies declined to comment or did not reply to emails regarding their possible interest in IL&FS’s portfolio.

IL&FS has defaulted on several payments since last August, and the board has appointed three financial and transaction advisors to draft a resolution plan for the company.

According to reports from local media, that could not be verified independently, the resolution plan will be proposed to the National Company Law Tribunal of India on Wednesday, and the bidding process for the company might start as soon as December.

IL&FS declined to comment.

According to its 2016-17 annual report, the conglomerate holds a large portfolio of infrastructure assets that includes more than 14,000 kilometres of roads across more than 30 BOT projects, the rapid metro network of Gurgaon, wind energy assets with a total generation capacity of 860MW, and a $2 billion portfolio of maritime and logistic assets, among others.

“The excitement with IL&FS is that you get almost free-risk assets, with no construction or development risk,” said Anuj Puri, chairman at AnaRock, an Indian real estate services firm. “In the [Indian] market you don’t have that many income-generating assets.”

Despite IL&FS’s current liquidity crunch, none of the GPs consulted expected the assets to be acquired at a discount. One of the managers pointed out that the price might depend on whether assets are put to the market individually or by selling the complete portfolio of some of IL&FS’s businesses, while another source said the new board will make sure it achieves “the best price” possible during the divestment process.

The Indian government appointed a new board for the massive conglomerate in early October, led by the Indian banker Uday Kotak, after the firm defaulted on several payments to its creditors. The country’s Serious Fraud Investigation Office has also opened an investigation into the company and its subsidiaries.

IL&FS announced at the end of August that the firm approved a “specific divestment plan” of 25 projects to reduce its debt by more than 300 billion rupees ($4.0 billion; €3.5 billion) It is unclear whether the resolution plan will include additional assets to those originally offered by the company in August.

According to the same statement, the firm said it was in a situation of “over-leverage and illiquidity,” and that 160 billion rupees were stuck in “claims and termination payments.”

IL&FS has been one of the main players in India’s infrastructure sector for three decades, involved in both the financing and development of projects in the region. India’s Life Insurance Corporation and Japan’s Orix are the two major stakeholders in IL&FS.