The board decided to meet on September 15 to ensure that IL&FS and other group companies do not default on any further repayment obligation.

The fundraising was necessitated after recent defaults by IL&FS group firms to various institutions. IL&FS, with a consolidated debt of around Rs 1 trillion, is facing delays in execution of projects apart from delay in receiving payments from various government agencies for constructing infrastructure projects.

Both LIC and SBI have agreed to invest in the company as IL&FS is considered "too big to fail" by government officials, said a source.

A source said Lone Star, I Squared Capital, and the National Infrastructure Investment Fund were in the race to buy out its road projects.

The board had earlier cleared a rights issue amounting to Rs 45 billion, which is crucial for the company to meet its financial liabilities. However, some of the investors had objected to the high premium.

In a board meeting held in the last week of August, the board of IL&FS had reduced dividend from Rs 6 a share to Re 1 a share to save cash outgo and provide funds to its subsidiaries to meet their financial commitments. At the same time, the board had cleared a plan to raise another Rs 50 billion by issuing non-convertible debentures.

On August 24, India Ratings downgraded IL&FS, citing weakening of some of its major investments in transportation, energy and financial verticals, and proposed restructuring of its business towards a capital-light model. “The rating action also factors in dilution in the liquidity buffers of IL&FS and system-wide tight liquidity conditions, which pose challenges in accessing long-term cost-effective funding," India Ratings had said. In July, former LIC managing director Hemant Bhargava was appointed non-executive chairman of the firm, as its financial conditions worsened.

In its fiscal 2018 annual report, IL&FS blamed the growing non-performing assets (NPAs) in infrastructure sector that led to banks taking a negative outlook for the sector and stop funding. It said three of its subsidiaries, IL&FS Transportation Networks' (ITNL's) projects, and the Srinagar-Sonamarg tunnel project were awaiting financial closure for three years.

The funding for these projects was partly provided by ITNL, with support from IL&FS group and through bill discounting facilities.

This has strained cash flows. Lack of equity funding has affected drawdown of loans sanctioned in two projects, it said.

"Due to the large debt burden on ITNL (at the consolidated and standalone level), credit availability has become a major issue as most banks have exhausted their exposure limits and are reluctant to fund projects. The large debt book and low share price of ITNL weakens external investor confidence and hinders other means of financing. These factors have led to a virtual credit freeze for funding infrastructure projects," it said.

Another subsidiary, IL&FS Financial Services (IFIN), was asked by the Reserve Bank of India (RBI) to reduce debt exposure in all the IL&FS group entities by March 2019 in conformity with the RBI's regulations on non-banking financial services on group debt exposure. This was after the RBI's inspection of the IL&FS Financial Services for fiscal 2018 revealed that the NBFC's exposure to IL&FS group entities have increased over the past few years. It also breached the regulator's norms on capital adequacy ratio and group exposure limits as of March 2018. The RBI asked the company to bring its exposure down within a year.