CONSTRUCTION major Infrastructure Leasing & Finance Ltd (IL&FS) has been handed control of rival Maytas Infra amid cancelled contracts and deep financial distress at a company once overseen by the son of the disgraced founder of the erstwhile Satyam Computer Services.
The government will wind down its role in Maytas Infra after having run it for about six months, a period during which it failed to arrest the cancellation of contracts the company had won before the Satyam financial scandal erupted in January.
For IL&FS, the countryâ€™s largest infrastructure and finance company, winning control of the Hyderabadbased firm will mean a foray into the contracting business, bidding for infrastructure projects with Maytas Infra and reviving tattered joint ventures.
The Company Law Board (CLB), which in February said it would not allow IL&FS a Maytas Infra Board seat because the two companies are competitors, cleared a plan that it had opposed just six months ago.
Teja Raju, the eldest son of Satyam founder B Ramalinga Raju, wholetime director B Narasimha Rao, and two of the four government-nominated directors will step down from the Maytas board. IL&FS gets the right to name four directors, including the chairman.
IL&FS, which is the single-largest shareholder in Maytas Infra, will control 37% of equity in the company, including a 22.6% stake pledged by the Raju family. Besides the familyâ€™s near 23% stake, Sicom, a Maharashtra government-owned institution, owns 0.5% and IFCI 2.5%.
Investors cheered the announcement by corporate affairs minister Salman Khurshid, sending the IL&FS scrip nearly 16% higher to Rs 265.70 on the BSE.
Maytas Infra will get Rs 55 crore in emergency cash from its new owner, which plans to raise additional funds through private share placements. IL&FS will also make an open offer and said it intends to buy the shares pledged by the original promoters. The company has been told by CLB that it must own at least a 26% equity stake in Maytas Infra for two years.
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