Introduction

Infrastructure Leasing & Financial Services Limited is one of India's leading infrastructure development and
finance companies. Its central mandate is catalyzing the development of innovative world-class infrastructure in
the country. For over 25 years, they have focused on commercializing infrastructure projects and creating value-
added financial services to become a proactive partner in India’s growth story. Widely acknowledged as the
pioneer of Public Private Partnership (PPP) in India, the IL&FS Group has, through a variety of projects,
benchmarked the private sector’s role in and commitment towards infrastructure development in India. It has
the following key subsidiaries:-

 IL&FS Financial Services Ltd (IFIN)

 IL&FS Transportation Network Ltd (ITNL)

During the year 2017 they had very high prospects as they were taking up big projects and were sure enough
that would be able to manage the big debts they took to finance these projects. But they problem began when
during the year 2018 they did their did a defaults

Why They Faced problems

IL&FS Financial Services, a group company, defaulted in payment obligations of bank loans (including
interest), term and short-term deposits and failed to meet the commercial paper redemption obligations.
Consequent to defaults, rating agency ICRA downgraded the ratings of its short-term and long-term borrowing
programs. The defaults also jeopardized hundreds of investors, banks and mutual funds associated with IL&FS.
The problem began when they defaulted the payment of 450 crore from the inter corporate deposits and
commercial papers this led to downgrading of the debt over the last few weeks in the span of two-three months
from then the infrastructure giant lost its credit rating. This made it very difficult for the company to raise debt
in the future. Later in September they again defaulted a sum of Rs. 1000 Crore from SIDBI ( Small industrial
development bank of India) while another of their subsidiary also defaulted a sum of 500crore from DFI(
Development Financial Institution).
Techniques and Tools Used to Evaluate the Financial Statement

Ratio Analysis of the prominent ratios of the company

 Profitability

 Solvency Ratios

 Financial Leverage

I Profitability Ratios:

1) Return on Equity = Profit After tax / Net worth

For 2018 = 5,843.21/69,501.95

 8.40%
For 2017 = 3,827.37/64,212.87

 5.96%
For 2016 = 2,740.34/56,088.59

 4.88%

2) Return on Assets = Net Profit / Total Assets

For 2018 = 5,843.21/2,47,075.44

 2.36%
For 2017 = 3,827.37/2,01,661.71

 1.89%
For 2016 = 2,740.34/201,007.60

 1.36%
3) Net Profit = Net Profit / Sales*100

For 2018 = 5,843.21/17,891.09

 30.64%
For 2017 = 3,827.37/16,536.59

 23.14%
For 2016 = 2,740.34/17,859.75

 15.34%

II Solvency Ratios

1) Debt to equity ratio = Total Debt/ Shareholders fund

Total Debt= Short Term and Long Term Borrowings, Debentures and Bonds

Shareholders Equity = Equity share capital + Reserve and Surplus

For 2018 = (1,01,790.49+97,305.85+33,714.74)/69,501.95

 3.34:1
For 2017 = (93,440.39+80,535.75+13,072.93)/64,212.87

 2.91:1
For 2016 = (96,056.17+19,913.27+80,535.75)/56,088.59

 3.5:1

2) EQUITY RATIO = Shareholder Equity/ Total Capital Employed

Shareholders Equity = Equity share capital + Reserve and Surplus

Total Capital Employed = Shareholders Equity + Debentures + Long-Term Loan

For 2018 = 69,501.95/(69,501.95+97,305.85+1,01,790.49)

 0.24:1
For 2017 = 64,212.87/(64,212.87+80,535.75+93,440.39)

 0.26:1
For 2016 = 56,088.59/(56,088.59+80,535.75+96,056.17)

 0.24:1
 3) Proprietary Ratio
= Total Equity/ Total Assets

For 2018 = 69,501.95/ 2,47,075.44

 0.28:1
For 2017 = 64,212.87/2,01,661.71

 0.31:1
For 2016 = 56,088.59/201,007.60

 0.27:1

III Financial Leverage

Financial Leverage= Total Assets/ Total Equity

For 2018 = 2,47,075.44/69,501.95

 3.55:1
For 2017 = 2,01,661.71/64,212.87

 3.14:1
For 2016 = 201,007.60/56,088.59

 3.58:1

Classification of Activities on the basis of Financing, Investing, Dividend Activities

Financial Decision taken in the Financial Year 2016-2017

FINANCING:

During the year, the Company had issued 333,000 Non-Convertible Redeemable Cumulative Preference Shares
(NCRCPS) on a Private Placement basis for an aggregate consideration of 4,995 million (including Share
Premium of` Rs2497.50 million).

INVESTING:

IL&FS INVESTMENT MANAGERS LIMITED (IIML) is a subsidiary company and the Fund Management
arm of the IL&FS Group, focusing on investments. The fund raising environment in India picked up, with an
aggregate fund raising for FY 2016 at US$ 5.8 billion, up 24% compared to FY 2015.
The company started focusing on its fund raising efforts primarily in Japan, Korea and Australia. This was also
evident in the significant rise in the share prices of the company due to the future prospects of expansions.

They invested comparatively more in the financial year 2016-2017 as is evident in the amount of dividend
received during the mentioned year as oppose to the financial years 2015-16 and 2014-2015. This is another
sign of decisions taken for the expansion purposes.

DIVIDEND:

Considering the state of affairs of the Company and pressure on the current year’s profit, the Board of Directors
have unanimously agreed not to declare any dividend in respect of equity shares

Financial Decision taken in the Financial Year 2017-2018

FINANCING:

There were no change in the Share Capital during the financial year 2016-2017.

INVESTING:

There was a successful commissioning of a WTE Project in Ghazipur that impacted the share prices of the
company. As such, we can also see that the Current Ratio in the year 2016-2017 was 0.93, which was quite high
considering they needed the current assets for the project mentioned above.

They issued huge amounts of loans through debentures and other sources of loans because of the Project
Chenani-Nashri Tunnel.

DIVIDEND:

During the financial year 2016-2017, the Board of Directors of the Company approved payment of interim
dividend in respect of Non-Convertible Redeemable Cumulative Preference Shares (NCRCPS). These were
as follows:

(a) @ 2% pa. This is Rs.0.20 per Share in respect of 5,000,000 fully Paid-up NCRCPS of Rs10 each amounting
to Rs.1.20 million (inclusive of dividend tax)

(b) @ 16.38% in respect of 240,000 fully Paid-up NCRCPS of Rs.7500 each amounting to Rs.354.86 million
(inclusive of dividend tax)

(c) @ 16.06% in respect of 375,376 fully Paid-up NCRCPS of Rs.7500 each amounting to Rs.544.19 million
(inclusive of dividend tax)
(d) @ 15.99% in respect of 184,624 fully Paid-up NCRCPS of Rs.7500 each amounting to Rs.266.48 million
(inclusive of dividend tax)

(e) @ 16.16 % in respect of 333,000 fully Paid-up NCRCPS of Rs.7500 each amounting to Rs.485.76 million
(inclusive of dividend tax)

Financial Decision taken in the Financial Year 2018-2019

FINANCING:

There were no change in the Share Capital during the financial year 2018-2019.

INVESTING:

The IIML (IL&FS Investment Manager Ltd.), had invested across 14 investments aggregating Rs.15.8 billion.
Given the healthy deal flow, during financial year 2018-2019, IIML (IL&FS Investment Manager Ltd.) has
raised an additional Rs.1.4billion from provident and retirement funds, thereby taking its Asset under
Management (AUM) to Rs.20 billion. Hence, this is quite visible in the liquidity ratios of the company too.

DIVIDEND:

The Board of Directors of the Company at its meeting had recommended a final dividend of 42.50% (Rs.4.20
per equity share) on the paid up equity share capital of the Company and Shareholders of the Company
approved the same.

The Board of Directors of the Company had recommended a final dividend of 10% (Rs.1 per equity share) on
the paid up equity share capital of the Company for Financial Year 2018-2019.

Impact of Wrong Decisions

IL&FS Downfall Mainly Because of Wrong Decisions. The IL&FS Group, especially its subsidiaries IL&FS
Engineering and Construction Company (IL&FS Engineering) and IL&FS Transportation Networks, entered
into major problems beginning 2012.

1. Those problems led to massive delays in execution of projects and a number of projects had become
stalled infrastructure projects.
2. The stalled projects adversely affected their financial performance and significantly increased the
leveraging as delayed projects were kept afloat by more and more debt financing,
 3. The government ordered the suspension of the existing IL&FS board, and permitted a six-member
government-appointed team to take control of the debt-ridden company.
4. IL&FS’s debt was rounded to more than Rs. 91,000 crores. This led to a series of defaults by IL&FS
Group and credit rating downgraded, affected in the capital markets.
5. The high debt stress was clearly visible in the company and its main subsidiaries for the last so many
years, but was camouflaged by misrepresentation of facts.
6. IL&FS Transportation Network witnessed significant erosion of profit starting from 2012-13 while its
net debt also increased more than two times, from Rs. 13,939 crores to Rs. 29,961 crores in 2017-18.

Profit for the Year

Year Reported
Reported Profits (in
Profits (in
Crores)
Crores)
350
March 2018 251.76 300
318.66
250
March 2017 236.39 251.76
200 236.39
March 2016 173.49 150 173.49
100
March 2015 318.66 50
March 2014 266.03 0
Jan-15 Jan-16 Jan-17 Jan-18

EPS of IL&FS

Year EPS
EPS
March 2018 7.65 15 12.92

March 2017 7.19 10 7.19 7.65

5.27
March 2016 5.27 5

0
March 2015 12.92 Jan-15 Jan-16 Jan-17 Jan-18

March 2014 13.69 EPS

Looking at the reported Profit and EPS of the last 4 years, we can se that Profit and EPS has drastically fallen in
the year 2016. Then it has gradually increased in the next year. But this doesn’t give the reality, which investors
had to face. We can observe the fall of share price from ₹300 in 2012 to ₹3 in 2018.

Trend of Share Price

Suggestions (Dian’s Part)

References

www.economictimes.com

www.businessinsider.com

www.wikipedia.com

www.moneycontrol.com

www.investopedia.com