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Group No : 3
Case : ILFS
Name of Student
1) SanketNagare
2) ShubhamMahajan
3) Ankit Darade
4) HarshalMore
5) ShubhamSonawane
ILFS Case Description
Infrastructure Leasing & Financial Services Limited (IL&FS) is a systemically
important Core Investment Company with the Reserve Bank of India and is
engaged in the business of giving loans and advances to its group companies (and
holding an investment in such companies). IL&FS has a large number of group
companies across various sectors such as Energy, Transportation, Financial
Services.
IL&FS Group, which had approximately over Rs. 91,000 crores in debt, was
facing a severe liquidity crisis. Between July 2018 and September 2018, two of
the subsidiaries of IL&FS Group reported having trouble in paying back loans
and intercorporate deposits to banks/lenders.
In July 2018, the road arm of IL&FS was facing difficulty in making repayments
due on its bonds. Further, in early September 2018, one of the subsidiaries of
IL&FS Group was unable to repay a short-term loan of Rs. 1,000 crore taken
from Small Industries Development Bank of India (SIDBI). Also, certain group
companies defaulted in repayments of various short and long-term deposits,
inter-corporate deposits, and commercial papers.
Company Information
• The company claimed to have 23 direct subsidiaries, 141 indirect
subsidiaries (including special purpose vehicles for different projects), 6
joint ventures and 4 associate companies, each of them is further
subdivided into additional legal entities, with much cross ownership as
well as ownership by investment vehicles of various governments.
However in the recent interview Uday Kotak stated that the company
has as many as 348 subsidiaries.
What company did?
IL&FS board did try and take corrective action. There were plans to start
selling assets. Term sheets were prepared, bankers engaged and
proposals invited. However, the sales couldn’t be completed in time to
avert a default.
Another plan was to raise ₹4500 crore rights issue as well as ₹3500 crore
line of credit for working capital requirements.
NCLT was approached under section 230 of the Companies Act to
establish a structure to the asset salesNCLT was approached under
section 230 of the Companies Act to establish a structure to the asset
sales
Stakeholder Mapping
A. Circle of Control - Employees, Management & Promotors
B. Circle of Influence Lenders, financial institutions, creditors, Third
parties
C. Circle of Concern Community, Government, Lenders, Regulators(RBI),
Shareholders, Media, Competitors, Activists & NGO, General public
Root Cause Analysis
IL&FS hadn’t disclosed bad loans on its books for years despite a big part of
its loan book having soured.
As it was the shadow bank or NBFC company, "Unscrupulous, negligent
and dormant management decisions were the main root cause of failure.
Poor fund management and controls :- IL&FS lent funds to insolvent entities
and troubled projects.
According to the ICAI, the auditors did not highlight the Reserve Bank of India’s
(RBI’s) inspection report, which had labelled IFIN as over-leveraged, besides
failing to report negative cash flows and adverse key financial ratios.
RBI or any other entity did not strictly regulated NBFCs. The IL&FS crisis has
raised concerns over the management of such entities

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medagqergaevad

  • 1. Group No : 3 Case : ILFS Name of Student 1) SanketNagare 2) ShubhamMahajan 3) Ankit Darade 4) HarshalMore 5) ShubhamSonawane
  • 2. ILFS Case Description Infrastructure Leasing & Financial Services Limited (IL&FS) is a systemically important Core Investment Company with the Reserve Bank of India and is engaged in the business of giving loans and advances to its group companies (and holding an investment in such companies). IL&FS has a large number of group companies across various sectors such as Energy, Transportation, Financial Services. IL&FS Group, which had approximately over Rs. 91,000 crores in debt, was facing a severe liquidity crisis. Between July 2018 and September 2018, two of the subsidiaries of IL&FS Group reported having trouble in paying back loans and intercorporate deposits to banks/lenders. In July 2018, the road arm of IL&FS was facing difficulty in making repayments due on its bonds. Further, in early September 2018, one of the subsidiaries of IL&FS Group was unable to repay a short-term loan of Rs. 1,000 crore taken from Small Industries Development Bank of India (SIDBI). Also, certain group companies defaulted in repayments of various short and long-term deposits, inter-corporate deposits, and commercial papers.
  • 3. Company Information • The company claimed to have 23 direct subsidiaries, 141 indirect subsidiaries (including special purpose vehicles for different projects), 6 joint ventures and 4 associate companies, each of them is further subdivided into additional legal entities, with much cross ownership as well as ownership by investment vehicles of various governments. However in the recent interview Uday Kotak stated that the company has as many as 348 subsidiaries.
  • 4. What company did? IL&FS board did try and take corrective action. There were plans to start selling assets. Term sheets were prepared, bankers engaged and proposals invited. However, the sales couldn’t be completed in time to avert a default. Another plan was to raise ₹4500 crore rights issue as well as ₹3500 crore line of credit for working capital requirements. NCLT was approached under section 230 of the Companies Act to establish a structure to the asset salesNCLT was approached under section 230 of the Companies Act to establish a structure to the asset sales
  • 5. Stakeholder Mapping A. Circle of Control - Employees, Management & Promotors B. Circle of Influence Lenders, financial institutions, creditors, Third parties C. Circle of Concern Community, Government, Lenders, Regulators(RBI), Shareholders, Media, Competitors, Activists & NGO, General public
  • 6. Root Cause Analysis IL&FS hadn’t disclosed bad loans on its books for years despite a big part of its loan book having soured. As it was the shadow bank or NBFC company, "Unscrupulous, negligent and dormant management decisions were the main root cause of failure. Poor fund management and controls :- IL&FS lent funds to insolvent entities and troubled projects. According to the ICAI, the auditors did not highlight the Reserve Bank of India’s (RBI’s) inspection report, which had labelled IFIN as over-leveraged, besides failing to report negative cash flows and adverse key financial ratios. RBI or any other entity did not strictly regulated NBFCs. The IL&FS crisis has raised concerns over the management of such entities
  • 7. Legal impact The prosecution complaint was filed in a special court of the Prevention of Money Laundering Act, charging former senior managemen personnel of IL&FS — Ravi Parthasarathy, Ramesh Bawa, Hari Sankaran, Arun Saha, and Ramchand Karunakaran along with Aircel founder C Sivasankaran. The Enforcement Directorate (ED) conducted searches at multiple locations in connection with the IL&FS crisis, made provisional attachment of bank accounts and immovable property to the tune of Rs 570 crore held by these people.
  • 8. Conclusion • IL&FS case will lead the way for infrastructure leasing and financing scenario in India. • The rating regime in India have to reviewed as it was investment grade despite the asset liability mismatch while as soon as default started the rating was changed. • The role of independent directors will also need to be reviewed