Infrastructure Leasing & Financial Services (IL&FS), the debt-ridden conglomerate, has appointed Sunil Behari (SB) Mathur as its new chairman. Mr Mathur replaced Hemang Bhargava. Following step down by its founder Ravi Parthsarathy on 20 July 2018, IL&FS had appointed Mr Bhagava as non-executive chairman.
Mr Mathur is former chairman of Life Insurance Corp of India (LIC). He was also former Administrator of Specified Undertakings of Unit Trust of India (SUUTI). He has been on the Board of IL&FS since January 2005 and is an independent director. Mr Bhargava, who is stepping down as non-executive chairman of IL&FS is managing director of LIC.
As reported by Moneylife, IL&FS, the massive conglomerate of over 174 direct and indirect subsidiaries, is unravelling fast. Like the cops in Bollywood movies, the regulators and rating agencies have woken up to the implications of IL&FS’s imploding only after it began to default on its obligations. The Reserve Bank of India (RBI), which classifies IL&FS as a systemically-important non-banking finance company, has ordered a special audit, only after it began to default.
At IL&FS, things started unravelling rapidly after Moneylife
first reported its Rs1 000-crore default to SIDBI
(Small Industries Development Bank of India) on 4th September.
This was followed by other defaults and a series of credit downgrades by rating agencies. The group debt is currently estimated at Rs1.2 lakh crore and what we have seen so far are tiny ineffectual steps by the board. It is nowhere up to the task of resolving a giant problem that is, once again, likely to need a bailout by the public through the exchequer.
During August 2018, rating agencies downgraded credit rating of IL&FS Holding Co to AA+ by all three agencies (placed on credit watch with negative implications by two and rating watch with developing implications by one) from AAA (stable) due deterioration of credit profile of some of its key subsidiaries and continued leverage at an elevated level with depletion of liquidity buffer.
Deterioration in the credit profile of IL&FS Transportation Networks Ltd (ITNL) consequent to escalated leverage at Standalone as well as Consolidated level together with decision to terminate few projects led to downgrade of its credit rating from A to BB. ITNL intends to terminate some of its projects affected by breach of key obligations of the project authority such as handover of land and full ROW. It has withheld further support to these SPVs which have subsequently reported irregularity in debt servicing. ITNL is pursuing early realisation of substantial project related claims, has taken up a strategic divestment programme and is recapitalising with a Rights Issue of Rs3,000 crore. However, the foregoing have resulted in delays in servicing its liabilities in few instances.
The rating of IL&FS Financial Services Ltd (IFIN), wholly owned subsidiary of IL&FS was downgraded from AAA to AA (with negative implications) on account of increased exposure to group companies, moderate profitability on account of higher credit costs and reduced level of importance to its parent company in view of the reorganisation of business at IL&FS level.
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