IL&FS : All you need to know

Infrastructure Leasing & Financial Services Limited (IL&FS) is an Indian infrastructure development and finance company. Founded in 1987 and headquartered in Mumbai, It operates through more than 250 subsidiaries including IL & FS Investment managers, IL & FS financial services and IL & FS Transportation networks India Limited (ITNL)

On 02 April 2019, former vice chairman of IL&FS, Hari Sankaran, was arrested by SFIO in Mumbai for fraud and causing wrongful loss to the troubled infrastructure lender. He is accused of granting loans to entities that were not credit-worthy or declared as non-performing accounts causing loss to the company and its creditors.The SFIO was granted custody of Sankaran till April 4. Earlier On 1st Oct 2018, the Government of India took steps to take control of the company and arrest spread of the contagion to the financial markets. A new board was constituted as the earlier board was deemed to have failed to discharge its duties. The new board consists of Kotak Mahindra Bank managing director Uday Kotak, former IAS officer & Tech Mahindra boss Vineet Nayyar, former Sebi chief G N Bajpai, former ICICI Bank chairman G C Chaturvedi, former IAS officers Malini Shankar and Nand Kishore.

What led to this situation?

In July to september 2018 some subsidiaries of the ILFS reported diffculty in paying back loans and deposits to their lenders. many newspapers reported that the Transport arm of IL & FS was having difficulty making payments due on its bonds.In the same month, reports were there that its founder Ravi Parthasarathy would be leaving the firm due to medical reasons, after having headed the firm for 30 years.

In September 2018, another media outlet reported that one of IL & FS’s subsidiaries was unable to repay a Rs. 1000 crore short term loan taken from SIDBI, which resulted in SIDBI asking its officers to resign.Subsequently, reports came that one of the IL & FS group of companies called IL & FS Financial services limited had defaulted on its commercial paper payments. This led to news of a possible audit by the Reserve bank of India. IL&FS Financial Services Ltd., one of the group’s many financial subsidiaries had defaulted on repaying about Rs. 450 crore worth of inter-corporate deposits to Small Industries Development Bank of India (SIDBI).

On 27 September 2018, IL & FS Financial services informed the BSE that it had defaulted on a Rs 52.4-crore repayment of short-term deposits and Rs 104-crore term deposit.[

However, in its replies to investors and the BSE, IL&FS investment services (IVC) clarified that the news items did not relate to it, as these were two completely different legal entities. A similar letter was published by IL & FS Transportation.

What now?

Six months have passed, but IL&FS remains as much an enigma as it was in the autumn of 2018 with consolidated debt to equity of 10:1 .
IL&FS Financial Services, with a loan book of over Rs 18,000 crore, saw non-performing loans reach 90%. The management has recovered 10% of the doubtful exposure in six months.

India’s leading investigating arm SFIO says IL&FS top executives led to the fall of the group of companies.

Read more | India’s largest Financial Scam?

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