Skip to main content

Crisis in IL&FS

IL&FS : Reasons and next road-map



Current update:-

1) The Enforcement Directorate (ED) has arrested the former Joint Managing Director of IL&FS financial services Arun K Saha and Managing Director of IL&FS transportation Network, its first arrest in the IL&FS case.
2)The investigation by the Serious Fraud Investigation Office (SFIO) into the affairs of IL&FS Financial Services (IFIN), which is the basis on which the ministry of corporate affairs has filed a chargesheet in a Mumbai court against the company management, found that BSR & Associates, an affiliate of KPMG, which was IFIN’s auditor, had on May 2018 raised queries about at least 17 of the company’s loan facilities being used for evergreening but ultimately never highlighted it in their report.
As is known, the MCA has also moved the Mumbai bench of the National Company Law Tribunal seeking a five-year ban on BSR & Associates and Deloitte Haskin & Sells for failing to do their statutory duty as auditors.
Company Overview:-Infrastructure Leasing & Financial Services (IL&FS)

IL&FS is an Indian infrastructure development and finance company operates through more than 250 subsidiaries including IL & FS Investment managers, IL & FS financial services and IL & FS Transportation networks India Limited (ITNL).  In April 2019, its newly constituted board informed investors that the company had 302 entities through which it currently operates, through a highly complex network of multiple business verticals.
IL&FS was formed in 1987 as an "RBI registered Core Investment Company" by three financial institutions, namely the Central Bank of India, Housing Development Finance Corporation (HDFC) and Unit Trust of India (UTI), to provide finance and loans for major infrastructure projects. Gradually, as the organization needed better financing, it additionally opened itself to two large international players, namely Mitsubishi (through Orix corporation Japan) and the Abu Dhabi Investment authority. Subsequently, Life Insurance Corporation India, Orix and ADIA became its largest shareholders, a pattern that continues to this day.
IL&FS has several projects in different sectors including Transportation, Area Development, e-Governance, Health Initiatives, Cluster Development, Finance, Power, Ports, Water and Waste Water, Urban Infrastructure, Environment, Education, and Tourism.

As of March 2018, the largest shareholders of IL & FS Investment services were as follows
  • LIC : 25%
  • ORIX Corporation, Japan (a part of Mitsubishi Keiritsu): 23%
  • IL & FS Employees welfare trust : 12
  • Abu Dhabi investment authority : 12%
  • HDFC Ltd : 9
  • Central bank of India : 7%
  • State Bank of India : 6%

Analysis:-

  • Auditors shows carelessness towards audit book.
  • NBFC financing those who not able to get loans from banks blindly
  • This crisis impacting on Infrastructure finance sector, Bank and Mutual Fund sector. 
  • RBI need to act strictly towards supervision of Bank and NBFC.
  • Weak Corporate governance
  • Share holders mostly are institutional players.
  • Debt to Equity ratio are big(18).
  • This huge debt not created in overnight.
  • Questions on Internal auditors, Inspectors and RBI.
  • Used post dated checks then that check was misplaced.
  • Need of separate regulator for NBFC's because of RBI have overburden handling multiple issues like Banks, monetary policy, NBFC.
  • Need to modify Checks and  balance system.
Conclusion:-
Landmark for future issues. Top position must have rotations in these organisations. Need to focus on strict regulatory framework. Uday Kotak committee should come with market determined bail-out package means no need to add money from government.  

Mayur Vasant Jagtap



Comments

Post a Comment

Popular posts from this blog

Get Ready for Nifty to Land at 18K – Probability on Cards

  Get Ready for Nifty to Land at 18K – Probability on Cards 🧭 Introduction: The Calm Before the Storm? India’s stock markets have been shining for years. The Nifty 50 Index has risen from the Covid crash lows of around 7,500 in March 2020 to above 26,000 by early 2025. Investors, traders, and even casual onlookers have been celebrating this unstoppable rally. But here’s the question every serious market participant must ask: What if this rally reverses sharply? Could Nifty fall… all the way down to 18,000? It may sound extreme. But when we take a closer look — through the lenses of technical analysis, probability, and historical patterns — the idea starts to make sense. This article will break down this bold call in the simplest way possible, so you can understand the why , how , and what next of this bearish scenario. 🧠 Deep Technical Analysis of the Nifty Chart 1. 📏 The Black Line (18,000 Support) – Not Just Technical, but Psychological That thick horizontal line you...
Post a Comment
Read more

Dark Profits, Dark Propaganda: Wall Street and India-Pakistan

 Dark Profits, Dark Propaganda: Wall Street and India-Pakistan The recent India-Pakistan tensions, marked by "Operation Sindoor," are accompanied by intense propaganda and fake news from both sides. Beyond the immediate conflict, a darker side of capitalism, potentially involving Wall Street's interest in defense profits, subtly influences the narrative. While direct evidence is scarce, the economic incentives for conflict and the role of media ownership warrant consideration. Discerning real facts amidst the information war is crucial for understanding the underlying dynamics beyond the immediate security concerns. The recent surge in tensions between India and Pakistan, marked by the Indian military's "Operation Sindoor" in response to the deadly Pahalgam attack, casts a long shadow over the subcontinent. While the immediate concerns revolve around regional stability and the potential for further conflict, a deeper look reveals the insidious interplay of ...
Post a Comment
Read more

The Algorithmic Threat: How Social Media Endangers Democracy

  The Algorithmic Threat: How Social Media Endangers Democracy Social media platforms have become an undeniable force in our lives. They connect us with friends and family, inform us about current events, and entertain us. However, beneath the surface of connection lurks a potential threat to democracies: the algorithms that curate our online experience. These algorithms, designed to keep us engaged, can create echo chambers and filter bubbles. They prioritize content that confirms our existing beliefs, regardless of accuracy, and push us further away from opposing viewpoints. This can lead to increased political polarization, where people become entrenched in their own ideologies and distrustful of anything that challenges them. How what's app messages impact on opinion: Echo Chambers and Confirmation Bias:   People often connect with like-minded individuals on WhatsApp. Constant exposure to reinforcing messages can strengthen existing beliefs, making voters less receptive to...
Post a Comment
Read more