IL&FS Financial Services, part of India's Infrastructure Leasing & Financial Services (IL&FS), said on Thursday it missed repayments on a host of bank loans and some term deposits due this month.
IL&FS is a major infrastructure finance and construction company, which has built up big debts and is now facing a credit crunch. As a result, authorities are trying to calm market fears that IL&FS's troubles could trigger a crisis in the wider non-banking financial sector.
IL&FS Financial Services said it was unable to service its obligations for bank loans due on September 12, 16, 24 and 26, a term deposit due September 25 and a short-term deposit due September 27.
The Economic Times reported on its website that the government has said it would look into helping to complete projects undertaken by the parent IL&FS and could also buy some of its healthy assets.
IL&FS is expected to hold its annual general meeting with shareholders and its board meeting on Saturday to weigh options for a potential capital infusion plan.
Its board has already approved raising funds via a Rs 4,500 crore rights issue and a Rs 3,000 crore debt-reduction plan through asset sales.
India's central bank is set to meet the large shareholders of IL&FS on Friday, CNBC-TV18 reported on Thursday, citing sources familiar with the matter.
IL&FS did not repond to request for comments outside regular business hours.
The company's top shareholders include India's largest state-run insurer, Life Insurance Corporation (LIC), Japan's Orix Corp, IL&FS Employees Welfare Trust and Abu Dhabi Investment Authority.
LIC Chairman V.K. Sharma told reporters on Tuesday that the insurer would not allow IL&FS to collapse. All options, including increasing LIC's stake in IL&FS, are open, Sharma said.