IL&FS Group: at Least Rs30,000 Crore of Loans At Risk, Estimates a Report
The Infrastructure Leasing & Financial Services Ltd (IL&FS) group, which has defaulted on several short-term obligations, raising a scare of contagion across the financial and real economy, may force its lenders to write off Rs30,000 crore of their loans, according to numbers crunched by REDD Intelligence from publicly available information. 
 
Risk Event-Driven and Distressed Intelligence (REDD) is a leading provider of material intelligence on emerging market event-driven special situations.
 
As is now known, the threat of such a contagion has forced the central government on 1st October to remove the board of directors, which was responsible, along with the top management, in bringing the institution to the brink of disaster.
 
In a report dated 27th September, REDD states that the consolidated debt on the IL&FS books stands at around Rs91,080 crore. Out of this Rs68,070 crore is secured and remaining Rs23,024 crore is unsecured. Total loans, which are secured against the cash flows of the company, is around Rs40,000 crore.
 
REDD estimates that, owing to the second lien nature of these secured loans at IL&FS and IL&FS Transportation Networks Ltd, “recovery would be constrained by the quality of collaterals,” which includes equity pledged by operating subsidiaries. 
 
Further, the loan at IL&FS Tamil Nadu Power, which was supposed to run a 1200MW power project, is also at risk, as it has been taken into insolvency process by bank lenders. 
 
In all, the report estimates that, loans amounting to at least Rs30,000 crore are at risk, including the loan at IL&FS Tamil Nadu Power. 
 
IL&FS, estimates REDD Intelligence, in its entirety holds assets of around Rs1,65,000 crore, across holding company, 175 subsidiaries and 66 joint ventures and associates. And the corresponding total liabilities stand at around Rs1,32,000 crore. The reported consolidated liabilities at IL&FS (holding company), stands at around Rs1,06,500 crore and inter-group liabilities is around Rs25,500 crore.
 
Similarly, inter-group assets aggregate around Rs49,000 crore, indicating an equity of Rs23,500 among the group companies.
 
IL&FS has reported total assets of over Rs1,00,000 crore in its operating subsidiaries. REDD Intelligence estimates that out this amount, around Rs25,000 crore are in financial assets and the remaining are in non-financial assets, spread across energy, road, international, maritime, rail, township, educational and other assets.
 
IL&FS, the brainchild of ex-Citibanker Ravi Parthasarathy, had ambitious plans to finance mega infrastructure projects and become a complete financial services company.
 
Incorporated in 1987, IL&FS was initially promoted by the Central Bank of India (CBI), Housing Development Finance Corp Ltd (HDFC) and Unit Trust of India (UTI). Others, such as State Bank of India (SBI), Life Insurance Corporation (LIC) of India, ORIX Corp of Japan, and Abu Dhabi Investment Authority (ADIA) invested in the 1990s, while many of the original shareholders, like UTI, diluted their holding.
 
In 1999, UTI had once asked for a three-member supervisory board to head IL&FS’s management; but after its own debacle, it sold out most of its equity.  LIC now has a 25% shareholding, making it yet another company where the insurance giant has a high exposure risk.  
 
What makes the unravelling of IL&FS extremely complex is that each of its subsidiaries also has a large investment from public sector banks and institutions. 
 
The IL&FS story started unravelling after Moneylife first wrote about its default to SIDBI. (Read: IL&FS defaults on Rs1,000 Crore Short-term Loan from SIDBI?)
 
Despite running scores of different projects and businesses, IL&FS has reported a loss or meagre profit over the past three years for which data is available.

Over the past 10 days many of these victims have begun to speak out, especially after the gold-plating of the GIFT City project was exposed by Moneylife. In the next few days, Moneylife intends to reveal some of these inside stories. 

 
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COMMENTS

Ramesh Poapt

2 months ago

value destruction in MF Navs details may pleased be published
amc/schemewise.thanx

REPLY

K V RAO

In Reply to Ramesh Poapt 2 months ago

Money Control site has all the data.

K V RAO

2 months ago

Please add "been" after "none has"

K V RAO

2 months ago

I wish the writer should be made a part of the newly constituted board. Alternatively,let her become key advisor. Despite all the evidence and details given by the writer, it will not be surprising if none is punished. That's India (BHARAT). We have witnessed several financial misdoings but none has 🐝 put behind bars. That's the reason for the unlimited malfeasance. Indians have lost faith in judiciary and in governments. No case has been brought to logical conclusion.

Satyam Savla

3 months ago

I see a striking resemblance of this story to the 2009 AIG bailing out big companies. It will be unfortunate to see the real culprits of these defaults not get punished since that what happened in USA. So India is way behind in getting these guys to pay for what they did

S Balakrishnan

3 months ago

Asset values are gross overestimates for sure.
50 paise to the rupee ? Creditors should count themselves lucky.
Requires a forensic audit for which there is neither expertise nor willingness

Sunil Rebello

3 months ago

The Golden Goose of our country - LIC is dying / bleeding a slow death - of a thousand cuts by its present owners - GOI

Nasir Ahmed Rayadurg

3 months ago

Everytime, its the same thing repeated. Common man has to pay for the ill works of the top brass, their expensive breakfasts, luxury travels, mindless spending on ads/marketing/promotions. No thought seems to be given to the hard working citizens who are singed to such an extent where they constanly live in fear of losing their job, coverage of an unexpected illness/disease/urgent operations etc, paying their childs school fees. LIC will soon become a Sick Unit as its not standing for the right cause and bailing out all the so called dead woods. Its the small and medium scale industries/entrepreneurs who lost out on getting any loans for starting/running their businesses as the loot maar continues.

IL&FS Mess: 4 Reasons Why Bad News Will Keep Spilling Out
Alarmed by the possibility of a contagion from the defaults of Infrastructure Leasing & Financial Service (IL&FS) spreading across the financial sector and the real economy, the government has promptly acted to change the IL&FS board. The swift action is commendable; but this was the easy part. 
 
The problem inside the IL&FS group is so huge that a group of five well-intentioned...
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ILFS Mess: SFIO Team Takes Charge of Server, Grills Officials. Lookout Notices at the Airports
While the media was occupied with the government’s sudden move to replace the board of Infrastructure Leasing and Financial Services (IL&FS), another drama was playing out at the swanky headquarters of the firm. 
 
The Serious Frauds Investigation Office (SFIO) was primed to spring into action, even as the government moved the NCLT (National Company Law Tribunal) at Mumbai. Sources say that an SFIO team was already hanging around the landmark IL&FS building waiting for the NCLT order. 
 
As soon as it received intimation that the NCLT had ruled in the government’s favour, SFIO officials swarmed into the building and took charge of the 9th floor which houses top management. 
 
They took control of the main server, to ensure that no documents/emails or information was destroyed or tampered with. Some insiders say that the server was shut down. 
 
While details could not be clearly ascertained, some employees believe that the SFIO team was accompanied by officials form the Reserve Bank of India. 
 
One source says that the two seniormost officials who have been with IL&FS for decades were being questioned by SFIO late in the evening. They were vice-chairman and managing director (MD) Hari Sankaran and Arun Saha, the joint MD and CEO (chief executive officer). 
 
 
Sources say that lookout notices have been put out at airports to prevent the top brass, including Mr Sankaran, Ramesh C Bawa and K Ramchand from leaving the country. Ironically, right until Saturday, when IL&FS held its board meeting, the top management and the board behaved as though it was business as usual and had put out a statement to say that key shareholders would subscribe to a rights issue to bail the company out of its difficulties. 
 
Interestingly, while IL&FS has always presented itself as a quasi-government entity, two of its largest shareholders are ORIX Corporation of Japan, which has a 23.54% stake and Abu Dhabi Investment Authority with 12.56% stake. 
 
Strangely, these large foreign shareholders do not seem to have questioned the management about its poor performance and lavish perks. While some investors have been trying to claim that top management hid issues from them, this is clearly false. 
 
Banking analyst Hemindra Hazari has written about how the complete erosion of IL&FS’s networth has been disclosed in the consolidated balance sheet for several years. 
 
In an article in The Wire he writes: “A cursory analysis of the consolidated accounts however reveals a horrifying saga: IL&FS has been an insolvent company since at least FY’2014 (no disclosure of consolidated accounts prior to FY’2014).”
 
However, senior management and the board not only put a lid on the mess, but also continued to sanction the lavish salaries, perks and high-spending ways of senior managers across the massive and diversified IL&FS group. 
 
Clearly, a lot of dirt is set to come out if the SFIO is allowed to investigate without interference. The modus operandi of IL&FS and how it gold-plated projects is already in the public domain. 
 
Former bureaucrats and executives who quit the group and attempted to expose the group have been hounded, humiliated and even arrested—the media was silenced by the confused narrative and false charges that the company put out. Others were too intimidated to speak. 
 
Over the past 10 days, many of these victims have begun to speak out, especially after the gold-plating of the GIFT City project was exposed by Moneylife. In the next few days Moneylife intends to reveal some of these inside stories. 
 
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COMMENTS

Ashok Senniappan

2 months ago

Make hay while sun shines. Have they given up the Indian citizen ship?

Sunil Rebello

3 months ago

The base problem of IL&FS is the GIFT city.
We may say that IL&FS is not a PSU but it always acted as a quasi PSU.
your article: 'Former bureaucrats and executives who quit the group and attempted to expose the group have been hounded, humiliated and even arrested'
This tactic is the clear example of our present government - shoot the messenger.
This is also exemplified in their name changing spree all over the country.
Now the whole weight of government authorities - RBI NCLT SIFO CBI ED etc etc are on IL&FS head.
But do they have expert advise or are they depending on the crap advise of the present Financial & Law team.
To change some major scam - you have to first accept that there is a scam.
IL&FS was not paid by the GOI for their work, Therefore the GOI takes it over.
who will take the haircut of 80,000 Cores+. for sure it will be us tax payers

sharafuddeen

3 months ago

Sucheta,appreciate your followup article(investigstion). Keep following and you will come across more childish way top brass in day to day management of IL&FS had been acting. The long & short of the story is that after reaching top of the ladder in finance industry, regulators seldom dare to scrutinise applying mind. My comments after reading your first article on this messup could not be seen(is not visible online). It was my first hand experience years ago.

JayaKumar VeeraRaghavan

3 months ago

How does this work , seems to be another 10000+ crore scam . Again whistle blowers silenced or ignored inspite of guvernemnt stake in it and size of likely default is so huge . Keeps happening with public money directly or indirectly

Ravindran

3 months ago

In all these drama, one fails to understand how the rating agencies' criminal role have been left out. Who controls the rating agencies (obviously SEBI and the RBI) and why no action is not being taken on the officials of SEBI/RBI and the rating agencies? The rating agency concerned should be debarred from assigning rating for certain years and a portion of the default amount should be recovered from it.

S Balakrishnan

3 months ago

What abt r p who seems to have been in the drivet's seat from the beginning resigning for 'health' reasons just when it was going to blow up.
Great timing.

SuchindranathAiyerS

3 months ago

IL & FS: Shutting the gate after the horses have fled. Will the investors get their money back?

SuchindranathAiyerS

3 months ago

India with far less resources is following the US trajectory to financial ruin for Non VIP citizens with more assiduity albeit indigenous " make in India" versions of Fannie May and Junk Loans / Bonds:

K V RAO

3 months ago

It is quite a surprise and unfortunate that eminent personalities (read R C Bhargav and Jaitheerth Rao)are part of the board.
This only confirms stuffing strong persons in the board does not guarantee governance. The best option for them was to come out of the mess. If they have noticed malfeasance as early as 2014, how come they joined the board?

V Ramesh

3 months ago

What was the rush. They could have waited for a few more years. What does "grill" mean? Is it like toast?
I think LIC has invested huge amounts of money (yours and mine) in several companies, and it does not look after these investments well.

Ashok Senniappan

3 months ago

When the companies networth is completely eroded in 2014, then what the hell the regulator doing?

Ashok Senniappan

3 months ago

All the senior officials of Banks/Auditors/ Civil Servants involved in scams
should not be permitted to leave the country

BV SUDHANVA

3 months ago

It would be interesting to see the network of the management and the involvement of the network

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