IL&FS Crisis

About IL&FS: IL&FS Share Holders List:

• Infrastructure Leasing & Financial Services Limited
(IL&FS), is an Indian infrastructure development and
finance company, formed in 1987 headquartered at Life Insurance Corporation of
India holding
Mumbai, Maharastra. 16.03
• IL&FS has been involved in some of the largest Orix Corporation
infrastructure projects in India including India’s
25.3
longest tunnel, Chenani-Nashri Tunnel, which was Abu Dhabi Investment
opened in April 2017.
6.42 Authority

Housing Development
Crisis at IL&FS: Excessive 7.67 Finance Corporation

leverage Central Bank of India-

Reason for the 9.02
fiasco 23 State Bank of India
Inefficient cash
flow management 12.56
Others

Defaults on few payments commercial papers Recent slowdown in infrastructure projects and
(CP) on due date because of accumulated short- disputes over contracts locking about Rs 90 billion
term while revenues are skewed towards the of payments due from the government have
longer term further worsened the condition.

Impact of IL&FS Crisis:

IL&FS sits a top a web of 169 subsidiaries, associates, and joint-venture companies, which makes the default even
more worrisome. Investors and traders are worried over the cascading effects of IL&FS’s defaults. The defaults
on debt obligations and inter-corporate deposits has raised concerns about the possibility of a contagion or spillover.
Money managers have marked down holdings of IL&FS debt and one financial company temporarily halted inflows into
some affected funds.

Actions taken by Government:

Indian Government has taken numerous steps to take control of the company and arrest spread of the contagion to the
financial markets.

SFIO( Serious Fraud SFIO arrested former Vice-

A new board of 6 members
Investigation Office) started chairman of IL&FS and major
under Uday Kotak was
investigation into the lapses lapses in audit of IL&FS done by
constituted
made Deloitte was revealed.

Challenges for the new board under Uday Kotak:

The company, with Rs 91,000 crore debt, has defaulted on a series of payments due to asset-liability mismatch and its
inability to raise funds from the market. The immediate task for the board would be to come up with a roadmap to
arrange for the funds and to also re-examine the IL&FS business model of being both a financier and a developer of
infrastructure projects. The new board will have to figure a way to unravel the numerous subsidiaries and associate
companies, which have over the years burgeoned under the parent IL&FS’s blessings.

The Way Ahead:

There may be a freeze on actions like payout of management salaries and payout of dividends that were declared at
IL&FS’s annual general meeting. The new board is reportedly considering monetization of IL&FS’s assets to pay back
investors and lenders. It also plans to sell as numerous projects to raise around funds for repayment.
Besides raising funds, the board may also have to order an audit to identify what went wrong and take action against
those found responsible.

Presented By: Socrates – The Consulting & Strategy Club, IIFT Delhi