The IL&FS group is facing serious liquidity crisis and has defaulted on interest payments on various debt repayments since 27 August.Reuters

India's troubled Infrastructure Leasing and Financial Services Ltd (IL&FS), whose recent defaults have roiled Indian markets, said on Sunday its shareholders have approved a plan allowing it to raise fresh funds through debt and equity issuances.

The shareholder approval gives the privately-held Indian infrastructure financing and construction firm a lifeline and time to sell some of its infrastructure assets and restructure its 910 billion rupee ($12.55 billion) debt pile.

In a brief regulatory filing on Sunday, a day after it held closed-door shareholder and board meetings, IL&FS said that its shareholders have approved the issue of secured non-convertible debentures worth 150 billion rupees, and approved an increase in the company's borrowing limit.

Shareholders also cleared an increase in the company's share capital, allowing IL&FS to proceed with plans to seek an equity infusion through a shareholder rights issue.

A string of defaults by IL&FS in recent weeks have led to a series of rating downgrades on the company and its subsidiaries that house some of its debt. Its rapid fall from grace has also spooked investors and sparked fears of a crisis in the country's non-banking financial services sector.

Following the Saturday board meeting, its managing director Hari Shankara said IL&FS's board would develop a "comprehensive" restructuring plan to pay its dues, via asset sales and a rights issue. He also said IL&FS is pursuing an application to block creditors from dragging it to a bankruptcy tribunal.

IL&FS has previously said it has seen interest from buyers for 14 of its 25, largely road, assets, and it plans to raise up to 30 billion rupees via this route.

The rights issue, expected to be completed in October, is seen as a measure to meet its immediate debt obligations before its asset sales commence.

India's Life Insurance Corp Ltd, IL&FS' biggest shareholder with a more than 25 percent stake, had said on Friday that it would participate in the rights issue.

IL&FS's other large investors are ORIX Corp of Japan with a 23.54 percent stake, and the Abu Dhabi Investment Authority with 12.56 percent. India's biggest lender by assets, State Bank of India, also owns a 6.42 percent stake in IL&FS.