What is the controversy surrounding IL&FS? All you need to know
New Delhi, Oct 2: Infrastructure Leasing and Financial Services (IL&FS), an unlisted infrastructure lending giant with over 150 subsidiaries, has been making headlines of late for all the wrong reasons.
The
group
has
a
debt
burden
of
over
Rs.
90,000
crore.
Panic
among
investors
set
in
after
the
company
defaulted
on
short-term
debt
repayment
a
month
ago,
follo
wed
by
more
defaults
that
eventually
led
to
a
ratings
downgrade.
The
IL&FS
crisis
is
likely
to
affect
people
who
have
invested
in
mutual
funds.
Government takes control of IL&FS, forms 6-member board led by Uday Kotak
IL&FS needs immediate capital infusion of Rs 3,000 crore and has also proposed Rs 4,500 crore as rights issue. The Reserve Bank of India (RBI) also met the shareholders of IL&FS on September 28 to discuss the revival and capital infusion plans for the company.
At the annual general meeting (AGM) of the company on September 29, shareholders - the State Bank of India (SBI), Life Insurance Company (LIC) and Orix Corporation - agreed to subscribe to the proposed Rs 4,500-crore rights issue.
How it started?
It all started in June when IL&FS defaulted on inter-corporate deposits and commercial papers (borrowings) worth about Rs 450 crore. Over the next two to three months, at least two rating agencies downgraded its long-term ratings.
As a result, the infrastructure giant, which is credited for building the longest tunnel in the country (the Chenani-Nashri tunnel), no longer carries an investment grade rating. This makes it difficult for the company to raise money in future.
Jaitley desperate to cover up 'thievery' in IL&FS case: Cong responds to 'National Saboteur' barb" /> Jaitley desperate to cover up 'thievery' in IL&FS case: Cong responds to 'National Saboteur' barb
LIC, with a 25.34 percent stake in IL&FS, is the largest shareholder in the company. Orix Corporate, Japan with a 23.54 percent stake is the second largest shareholder. Other large shareholders include Abu Dhabi Investment (12.56 percent), Housing Development Finance Corporation - HDFC (9.02 percent), Central Bank of India (7.67 percent) and State Bank of India (6.42 percent).
What has been done?
The government has taken control of Infrastructure Leasing & Finance (IL&FS) after getting an approval from the Insolvency & Bankruptcy Court in Mumbai.
The NCLT has appointed a six-member panel to take over the management at IL&FS with immediate effect. The panel will be headed by managing director of Kotak Mahindra Bank - Uday Kotak.
Finance Minister Arun Jaitley has said the government will take all measures to ensure that adequate liquidity is provided to non-banking financial companies or NBFCs, mutual fund houses, and small and medium enterprises or SMEs, after the stock and bond markets were rattled by the IL&FS crisis.