State-owned insurer LIC Tuesday said it will not allow debt-ridden IL&FS to collapse and explore options to revive it.
The Life Insurance Corporation (LIC) has the largest shareholding in IL&FS.
IL&FS Financial Services, a group company of IL&FS, defaulted on one of its commercial paper (CP) issuances due for repayment on Monday. This was the third default by the company.
LIC Chairman V K Sharma, after a meeting at the finance ministry, assured that efforts are being made to keep IL&FS afloat.
"We will ensure IL&FS does not collapse. We will not allow contagion to spread from IL&FS…All options are open (including raising stake in the company)," he said.
The infrastructure development and finance group has been facing liquidity issues for some time and had defaulted on a Rs 10-billion debt from Sidbi earlier this month. On September 14, it had again defaulted on a repayment of Rs 1.05 billion CPs and the next day, it had defaulted on Rs 800-million inter-corporate deposits (ICDs).
Meanwhile, the finance ministry has maintained that IL&FS Group is independent of the government and the company needs to resolve its issues.
Although the government has no holding in the company, some of the state-owned financial firms, including LIC and SBI, are shareholders of the non-banking financial company (NBFC).
"IL&FS is independent of the government. It has independent board and shareholders. So, IL&FS needs to resolve its issues on its own and I think it is capable of doing it," Economic Affairs Secretary Subhash Chandra Garg had told PTI.
"It has assets, it has liabilities to take care. There might be some temporary mismatch, so it is IL&FS, which will deal with the problem. The government is not involved directly," Garg had said.
IL&FS, which is credited for building the longest tunnel in the country (the Chenani-Nashri tunnel), is sitting on a debt pile of around Rs 910 billion and had been downgraded to junk status by rating agencies following the default. Of this, Rs 570 billion are bank loans alone, most of which are from state-run lenders.