Mumbai: Former LIC chairman S.B. Mathur will be appointed chairman to the board of Infrastructure Financing and Leasing Services (IL&FS), the company decided at a board meeting that was held on Saturday, according to a representative. He will be replacing Hemant Bhargava, LIC’s managing director, who was also serving as non-executive chairman at IL&FS since July.
The company representative said this change in chairmanship was necessary because of the conflict of interest that arose in Bhargava’s role at the head of both LIC and IL&FS.
IL&FS, which is weighed down with debt of nearly Rs 1 lakh crore, is approaching shareholders for capital infusion. LIC, with 25.34% holding, is IL&FS’ biggest shareholder.
IL&FS had announced two weeks ago that its board of directors had approved a rights issue of Rs 4,500 crore to shore up capital in its group entities. The company intends to issue 30 crore equity shares at Rs 150 each by 30 October and another Rs 4,500 crore as borrowing from existing shareholders within the next one month.
The company’s net worth at the end of last fiscal was Rs 7,400 crore.
The company will hold an extraordinary general meeting in 15 days from now to finalise capital-raising plans, the person quoted above said.
Over the last few months, IL&FS has been facing a liquidity crunch and defaulted on some inter-corporate deposits, commercial papers and failed to repay a short-term loan of Rs 1,000 crore to the Small Industries Development Bank of India.
Problems at the company have been exacerbated by a recent ratings downgrade by ICRA Ltd which took down the company’s credit score by 9 notches from AA+ to a BB last week.
On 14 September, Mint reported that state-run insurer was likely to subscribe to Rs 4,000 crore worth of non-convertible debentures from the IL&FS group to boost its capital requirements.