IL&FS gains NCLAT approval to sell its subsidiary, IL&FS Paradip Refinery Water Ltd (IPRWL), marking a key move in resolving its financial crisis. This sale will help reduce the company’s debt by ₹1,000 crore. By doing so, IL&FS can streamline operations and recover from its liabilities.
IPRWL was set up to meet the water requirements of Indian Oil Corporation’s (IOC) Paradip Refinery in Odisha. Initially, IOC opposed the sale, citing the Build, Own, Operate, and Transfer (BOOT) agreement. This agreement tied the subsidiary to the refinery until 2039. However, the tribunal dismissed IOC’s objection and granted IL&FS approval to proceed with the sale, provided the terms of the agreement were respected.
The tribunal’s decision enables IL&FS to move forward with the transaction, a vital part of its asset resolution strategy. The approval provides IL&FS with the funds needed to address its debt and improve its financial health.
Why NCLAT approval matters for IL&FS
NCLAT’s ruling followed a petition from IL&FS, which argued that selling IPRWL was crucial for reducing its overwhelming debt. IOC’s refusal to acquire 100% of IPRWL’s shares left IL&FS with no alternative but to seek the tribunal’s approval to find a new buyer. NCLAT upheld IL&FS’s position, allowing the sale to proceed.
The tribunal emphasized that the buyer must meet certain technical and operational standards. This ensures that the water supply to the Paradip Refinery continues without disruption.
The sale of IPRWL fits IL&FS’s broader strategy to reduce its ₹99,355 crore debt. By September 2024, IL&FS had repaid ₹38,082 crore of this debt. It is now working to resolve the remaining amount. The NCLAT has set a deadline of March 31, 2025, to complete the resolution of 58 entities.
IL&FS originally oversaw 302 entities, with 169 based in India and 133 offshore. The approval to sell IPRWL demonstrates IL&FS’s commitment to restructuring its financial position and stabilizing its operations.
