LIC, SBI set to provide liquidity to stave off IL&FS crisis

Life Insurance Corporation (LIC) and State Bank of India (SBI) are set to provide liquidity support to the beleaguered IL&FS. According to a report, SBI and LIC are likely to subscribe to the forthcoming right issue from IL&FS following which their stake in the company will rise. Currently, SBI has 6.42 per cent stake in IL&FS while LIC has 25.34 per cent stake in the beleaguered firm. According to reports, shareholders of the infrastructure financer will meet to approve increasing the authorised capital of the company to Rs 4,500 crore from Rs 1,500 crore now, which will enable it to raise Rs 4,500 crore through a rights issue. The company is also looking to raise additional credit facilities from its shareholders. As valuation of IL&FS shares have gone down, those subscribers who do not subscribe to the right issue will see their stakes shrinking by nearly 70 per cent. The IL&FS Employees Welfare Trust and Central Bank of India, who hold 12 per cent and 7.6 per cent stake in the company respectively, are staying away from the right issue. Following the right issue, their stake will fall to 3.6 per cent and 2.3 per cent respectively, the daily said. The report said that IL&FS is hopeful that Orix Corporation of Japan, which is a major investor in IL&FS (23.54 per cent stake), will increase its stake in the company by subscribing to the right issue. It may be noted that Orix Corporation had earlier set a condition that IL&FS should sell some of its assets before it can expect funds from the company, the report further added. IL&FS has already told shareholders that it will sell assets worth Rs 30,000 crore over the next 12 to 18 months.