Lenders nod to Howen International buying 42.25% in IL&FS Engineering

IL&FS Engineering and Construction Company Limited (IL&FSENGG) has said that the Committee of Creditors (CoC), representing 82.58% in value, has approved a revised bid by Howen International Fund SPC to acquire 42.25% of its equity held by promoter entities. The move marks a critical step in the debt-ridden company’s resolution process, initiated under the National Company Law Appellate Tribunal (NCLAT)-approved framework.

In a regulatory filing to stock exchanges, the company disclosed that the CoC voting concluded on 21 April 2025, after multiple extensions. Howen International, formerly Almas Global Opportunity Fund SPC, emerged as the successful bidder. The transaction remains subject to approvals from NCLAT and the National Company Law Tribunal (NCLT). This follows a Swiss challenge method initiated in 2022 after an unsolicited bid was received for the company’s equity.

Earlier in February, IL&FS Engineering and Construction reported a standalone net profit of Rs 1.5 crore for Q3 FY25, a stark contrast to a Rs 10.71 crore loss in Q2. However, cumulative losses for the nine months ending December 2024 stood at Rs 12.27 crore.

Auditors highlighted severe concerns, noting accumulated losses of ₹3,607.71 crore as of December 2024, a fully eroded net worth, and current liabilities exceeding assets by ₹3,786 crore. The company has defaulted on loans worth Rs 2,628.15 crore, including ₹2,047 crore owed to group entities.

Survival hinges on resolution process
In their review, M. Bhaskara Rao & Co., the statutory auditors, flagged a “material uncertainty” about IL&FS Engineering and Construction’s ability to continue as a going concern, citing reliance on the resolution process. The NCLAT’s 2020 order freezing interest accruals post-October 2018 has provided temporary relief, but unpaid interest now totals ₹2,506.63 crore.

The company’s operations have dwindled, with revenue from operations dropping to ₹67.91 crore in Q3 FY25 from ₹258.54 crore in FY24. Ongoing investigations by the Serious Fraud Investigation Office (SFIO) and Enforcement Directorate (ED) into financial irregularities at IL&FS group level add to the challenges. A 2021 forensic audit revealed anomalies, though adjustments remain indeterminable pending probe outcomes.

IL&FS Engineering and Construction, categorized under the “Red” group by IL&FS’s reconstituted board, has been under resolution since 2018. The current bid, if approved, could inject stability, but stakeholders remain cautious. The trading window for insiders has been closed since February 25, 2025, to prevent insider trading amid the sensitive process.

Also see: NCLAT restrains banks from declaring IL&FS from wilful defaulter