3
Kukrc,o et
June 2018 till December 20 9
Tabl I. ILFS Timeline: When and What Happened from
Date News ltem
IL&FS group's transport subsidiary IL&FS Transportation Networks (|TNL) delayed
repayment of USD 64 million of inter-corporate deposits from Small Industries
Development Bank of India (SIDBI). Rating companies lCRA and CARE rating agencies
downgraded ITNL's debt papers/credit facilities citing weak financials.There was lots
of criticism of rating agencies being reactive, rather than proactive in the media and
investors community (Parmar, 2018).
Group's Founder and Chairman Ravi Parthasarathy steps down, citing health reasons.
21 ju 20: Hemant Bhargava, LIC MD and nominee, takes charge as Non-Executive Chairman of
IL&FS group. (Parmar, 2018).
Group's financial arm IL&FS Financial Services defaults on repaying a few hundred billion
28A:st018
two days later.
of rupees to its commercial-paper investors but pays the same
(Parmar, 2018).
subsidiary defaults on dues
Eart, DECDer The group defaults on a USD |43 million term loan and its
2018 worth USD 7I million owed to SIDBI. (Parmar, 2018).
Aug ennd
ICRA, CARE and Brickwork Ratings downgraded the conglomerate's various long- and
eariy0t4 short-term borrowing programmes worth over USD I.7billion to
'default or junk'
entities.
2018 grades. ICRA downgraded the group twite in a fortnight and removes all group
from its rating watch. Meanwhile,the RBI initiates aspecial audit. (Parmar, 2018).
12 S m o 26 Several short-term loan defaults take place, totaling USD 63 million (bank loans: USD
Sepe:ber 2)18 41 million, term deposits:USD I5 million and short-term deposit of USD 7 million).
(Parmar, 2018).
12 ) 2018 In aletter to employees., IL&FS says USD 2.3 billion is stuck in claims and termination
payments with concession authorities and it had been planning on raising USD 6.4
billion through the issue of shares and USD 500 million as long-term debt from
shareholders. (Parnmar, 2018).
2018 Former LIC Chairman SB Mathur takes over as iL&FS group Chairman. The company
started planning tomonet1ze assets to pare its debt by up to USD 4.3billion over the
next 18 months and identifies 25 projects for the same. (Parmar, 2018).
I8 2018 Market regulator, Securities and Exchange Board of India (SEBI) started looking into the
IL&FS matter with regards torat1ng agencies and he impact on mutual funds. (Parmar, 2018).
21 2018 Fears of adebt market crisis, due to an IL&FS default prompts DSP Mutual fund to
sell commercial papers of Dewan Housing Finance (DHFL) which leads to a contagion
effect in equity markets, which crashed nearly I.500 points. Ranesh C Bawa, MD and
CEO of IL&FS Financial Services res1gns (Parmar, 2018)
IL&FS defaulted aga1n and loses access to fund rais1ng through commercial paper
market for up to six months from the date of repayment of this obligation. IL&FS
board seeks relief from NCLT to work out an arrangement with shareholders, creditors
and board of directors. SIDBI threatens to file a case at the NCLT for non-repayment.
(Parmar, 2018).
28 S 2018 Top shareholders meet RBi and raised concern on the crisis. (Parmar, 2018).
29 013 At its Annual General Meeting (AGM). IL&FS decides to raise USD 643 million through
a rights issue and raises borrowing limit to USD S billion fromn USD 3.6 billion,.
Thecompany appoints Alvarez and Marsal as specialist agency to execute the debt
restructuring plan. (Parmar, 20 18).
.IO: er 3 NCLT judgement allowedgovernment to assume control-on the company and institute
a new boardunder the chairmansthip of Uday Kotak and five other board members.
(Parmar, 2018).
(Table Icontinued)
South Asian Journal of Business and Management
Cases
Table nti
3te News Item
NCLT passed an interim order granting a moratorium on
all creditor acCtions against
IL&FS as well as all its group companies (Goel, 2018a).
3 IL&FS new board appointed advisors for developing and executing a
(Goel. 2018b).
resolution plan
21 Fetiiny 019 Enforcement Directorate (ED) registered a case of money laundering against the
former
CMD of IL&FS Ravi Parthasarthy,former director Hari Sankaran,lL&FS Rail and IL&FS
Transportation Networks IndiaLimited (|TNL) (Rajput, 2019).
Marci 319 Audit firm Grant Thornton submitted its interim report on the special
audit of IL&FS
flagging dealings aggregating to USD 1.9 bilion as suspect (Business Standard, 2019a),.
New IL&FS board sent a show cause notice to the.former Board of IL&FS Financial
Services Limited (IFIN) asking why the criminal action should not be initiated against
them (Rajput & Sinha, 2019).
IL&FS agreed to sell its 874 megawatts (MVV) operational wind energy portfolio to
State-run gas utility GAIL (India) Led for 4,800 crore, this ensures that debt of
*3700 crore on wind power Special Purpose Vehicles (SPVs)will be fully paid back.
3 Apr S1S IL&FS agreed to sell its 874 megawatts (MW) operational wind energy portfolio to
state-run gas utility GAIL (India) Ltd for 4,800 crore, this ensures that debt of
3700 crore on wind power SPVs will be fully paid back.
3M:
Independent directors of various lL&FS companies are under the scanner of Ministry of
Corporate Affairs (MCA) for alleged lapses in carrying out their duties.
Ma 19
The tD carries out raids is residences and offices of four directors of IL&FS, this was in
connection with money laundering probe.
OMa19 The Ministry of Corporate Affairs (MCA) and the new board at IL&FS are investigating
why questions raised by a junior analyst at a rating agency about financial irregularities
at the infrastructure financier were ignored by the top management at che
creditworthiness evaluator.The junior executive has allegedly told probe officials that
when he brought his concerns to the notice of the senior management at the ratin8
agency. the decision makers refused to act upon his fnd1ngs. claimingthe books of IL&FS
and related companies were good
The Supreme Court of lndia allowed reopening of4L&FS accounts for the last five
years The move by the top court comes as a setback for Hari Sankaran, the former
IL&FS managing director, who had challenged an order by che National Company Law
Appellate Tribunal (NCLAT) to reopen the past books of the embattled infrastructure
lend1ng company
June:
It was reported that the Auditor, Delortte and Haskins and Sells (DHS) was aware of
the comparny's modus operand1 of funding the defaulting borrowers for payment of
interest and principal in a fraudulent manner by lL&FS management time and again to
window dress the asset book of the company for several years. The auditor was thereby
complicit in nature with the management.
Ii&FS group starts monetizing its assets, put its2,880 acres of non-contiguous land banks
spread across seven villages in the Kutch region of Gujarat for sale.
July Grant Thornton reported that the credit rating agencies gave top ratings to lL&FS group
entities despite being aware of the weak financials of the group. SEBI hence expanded its
probe into the role of credit rating agencies CRAs.
A20 Blatant mis-governance reported by RBI report. The RBi report said that sorme of
the key committees in IL&FS did not convene any meetings in last few years, the Risk
Management Committee(RMC) and the Investment Review Committee did not meet
for around three years.
Kuk C 5
Dai: News Item
The ED filed charge-sheet and attached assets worth Rs 570 crores under the
provisions of Prevention of Money Laundering Act (PMLA)
6
S t 09 India's first fully privately financed Rapid Metro system, built by IL&FS is facing closure
due to the financial crisis.
21o 2019 Gujarat Narmada Valley Fertilizers and Chemicals Limited (GNFC), in its annual report
and usecured
mentioned that it might lose Rs 10.25 crores as it is holding secured
debt securities of IL&FS.
2019 as agaínst
50:tb 2019 IL&FS reported a loss of Rs 22,527 crore for the year ended March
incurred a loss (including
a profit of Rs 333.4 crore in March 2018.The company has
the year ended March 31,2019.
other comprehensive income) of Rs 22,527.25 crore for
auditor SRBC & Co said.
and has net liabilities of Rs l6,935.I crore, the company's
Financial Reporting
2019 Audit quality review of Deloitte, Haskins and Sells by National (Deloitte) has failed
disclosed that DHS
Authority (NFRA) reported,'The AQR has
(standards of auditing). The instances of
to comply with the requirement of the SAs
appears to NFRA that DHS did not have
failure noticed are of such significance that it conducted
report asserting that the audit was
adequate justification for issuing the audit
in accordance with the SAs'.
S0u: T uhors.
Services
Overviw of Infrastructure Leasing & Financial
Linnite and Its Capital Structure
development and finance companies. Its central
mandate
IL&IS is w of India's leading infrastructure Systenmically
world-class infrastructure in the country. It is a
W.: iCat:ivse the development of innovative Reserve·Bank of India
In;o:lon-Deposit Accepting Core
Investment Company registered with
investors such
initially promoted by India's institutional
(RSBaut ing Regulatorof India). IL&FS was Trust of
Ceil Bank of India, Housing Development Finance Corporation Limited and Unit
as th inducted other institutional
has broadened its shareholding and
ind : ) t e last 30 years, IL&FS ORIX Corporation Japan
Nh as the State Bank of India, Life Insurance Corporation of India,
J}abi Investnnent Authority (Table 2).
ad.
hsize oflL&FS can be gauged from the fact
that it has 186 subsidiaries, 146 jointly controlled
controlled operations outside India and
20 associate entities as per its
en! udig | | | jointly Spain, London and
2017-2018. Its international presence includes offices in Singapore,
a...repoat of Philippines and Abu Dhabi. As per the
audited
partners in the USA, Tokyo.
Duut ali obust network borrowings was USS 16.5
company as on 31 March 2018, the size of the total assets and
fn: i t h e
SS13.6 billion, respectively. these two
NBFCs, namely IL&FS and IL&FS Financial Services (IFIN);
Sgroup has two model is distinctive; it was both a
financier and
group debt. The business
r 35% of the equity investments
transactions are also intricate. IL&FS, the holding company, had
ithe group stake in these
money, apart from having an equity
ries, and its financial arm IFIN lent resulting in a high debt
L&FS depended heavily on external borrowings to fundits projectsits borowing obligations.
su increasingly difficult for IL&FS to service
tsal: Iable 3), and it became durationmismatch, and the duration gap
was widening.
ratio, the company had
Ap ot: h debt-equity debt-equityratio carried by other
cdadebt which was always at the higher end of the range of suddenly
I! N a
However, in the year 2017-2018, IL&FS debt-equity ratio
cOn,)ic . the same industry.
