IL&FS gets NCLT approval for sale of education assets

New Delhi, The National Company Law Tribunal (NCLT) has approved the sale of education assets of debt-ridden IL&FS to Lexington Equity Holdings Ltd (LEHL).           A two-member Mumbai bench of the NCLT approved the sale of IL&FS’s 73.69 per cent stake in Schoolnet India, formerly known as IL&FS Education & Technology Services, to Falafal Technology Pvt Ltd.           Falafal Technology is a step-down subsidiary of LEHL, which already owns 26.13 per cent stake in Schoolnet.

Schoolnet has two subsidiaries — IL&FS Cluster Development Initiative (ICDI) and Skill Training Assessment Management Partners (STAMP) — and also owns 80 per cent stake in IL&FS Skill Development Corporation (ISDC).

“We are of the view that the sale of education assets has been done within the resolution framework and the same is approved and recorded,” NCLT said in an order dated August 31.

The tribunal has also allowed other reliefs regarding the deal sought by IL&FS.

According to the order, the Committee of Creditors (CoC) has already approved the deal with a voting share of 75.46 per cent by value.          Justice D K Jain, who is supervising the resolution process of IL&FS, had approved the Schoolnet deal on June 4, 2020.          The resolution process of IL&FS is being done on the lines of corporate insolvency resolution process under the Insolvency & Bankruptcy Code (IBC).

The debt woes at IL&FS are being addressed through a special dispensation after the government superseded the group”s board in late 2018 and is not being done under the IBC.  

Earlier, Career Point Publications Ltd (CPPL) had emerged as the sole bidder for the education assets of IL&FS. However, it could not proceed within the time frame and the consent cum waiver granted by the minority shareholder LEHL had expired.

On December 27, 2019, LEHL had expressed its concerns over the delay and IL&FS cancelled Career Point’s bid after it failed to comply with various requirements as per the Request for Proposal (RFP).          LEHL through its wholly-owned subsidiary Falafal Technology submitted an unsolicited bid for the education assets of IL&FS on January 28, 2020.

Falafal had agreed to acquire 68.93 per cent share held by IL&FS, 4.76 per cent by the IL&FS Employee Welfare Trust (IEWT) and 0.18 per cent by certain individual shareholders at a price of Rs 7.39 crore and a lump sum consideration of Rs 1 each for acquiring the business undertaking of each of ICDI and STAMP on slump sale basis. 

LEHL had also agreed to service the entire debt of Schoolnet, including loans of Rs 261.80 crore and Rs 122 crore availed by ICDI and STAMP, respectively, from IL&FS Financial Services Ltd (IFIN).

According to IL&FS, though the Falafal bid was not received under the RFP, it made all efforts to ensure close compliance with the RFP requirements.

“Based on the guidance provided by the new board to the Asset Sale Committee (ASC), Falafal bid was assessed and it was found that it is better than the bid submitted by CPPL,” IL&FS had submitted to the NCLT.

Moreover, respective boards of ICDI and STAMP have also acknowledged and accepted the Falafal bid respectively, NCLT said.

This transaction, once completed, will reduce overall debt of IL&FS by Rs 600 crore and provide positive equity value for its stake in Schoolnet India.

As per the resolution road map for IL&FS, its group companies have been classified into three categories — Green, Amber and Red — based on their respective financial positions.