Around 2008, The then Promoter of Satyam Promoter Ramalinga Raju Came up by saying that I had made a mistake. I cooked the books—etc. Etc. The global financial system was also going from Jittery time.
Yes. You are Reading about IL&FS only, but please understand that today’s IL&FS Engineering is Maytas infra.
And now, in 2018, The ghost of Satyam is here in front of all of us. Again. But today, the Stakes are big. Many peoples call it the Biggest distress after the independence of India. Because the government of India recently came up with reforms in bankruptcy and the financial sector, there is still no regulator for some companies.
Ravi Parthasarathy founded Infrastructure Leasing & Finance Services. He was Stepped out, or You can say Kicked out.
It was formed in 1987 as RBI registered Core Investment Company promoted by Financial Institutions Owned By India. Its investors include LIC, SBI, Central Bank of India, Orix Corporation Japan, and Abu Dhabi Investment.
The company has 250+ group companies, including Subsidiary, Joint Venture, and Associate. The company is one of the largest and most critical institutions due to its operation. It operates in IT, Financial Services, Debentures, Bond trusts, Investment Banking, the Infrastructure company, Asset Management, Project advisor, development, etc. Group Level Debt is 91000 cr. 60% are Non-convertible Debenture Out of which 16500 are from IL&FS Financial Services. Held by GIC 710 CR, Postal Life Insurance 687 cr, NPS trusts 665cr, LIC 540 cr, RPLI 318 cr. Etc SBI Employees Pension Fund 435 cr, SBI Employees Providence Fund 410 cr. Revenue ₹18798 cr with a loss of ₹1886.85. In short, the balance sheet is solid but not liquid.
Regulators like IRDA and PFRDA were forcing Insurance companies and Pension companies to reduce holding them on their portfolios. This issue is significant for India as it highlights the grey area in the Indian financial system. There is no regulator or no rules and laws to decide what to do in such a situation. FRDI bill was there but went wrong due to one clause calling BAIL IN will be possible, and the deposits in such firms are not secured. Many people think that if Big industrialists took loans FROM PSU banks and ran away like Vijay Mallya, what about ordinary depositors.
The importance of the company increase with the fact that Bonds and papers excluding Bank loan issues from IL&FS account for 3% of The Indian Bond Market. Even Postal Life Insurance, Many mutual funds, and some other Big Institutions are invested. Bank loan to IL&FS accounts for 0.7% of the Bank loan universe. If that went to become NPA, Banking System would Destroy.
What is the Issue? It is not new. As per one source, It was in a problem since 2008. But There was confusion: Who is the regulator of this company, and what is it? An NBFC? But is it in the business of infrastructure? So infrastructure company? No. There is some Financial Service company. Having exposure to IT Business also. No Regulator. Neither RBI. It is not a Bank. Not Finance Ministry. It is not a Govt company. Not even SEBI. It is not registered. There is no system to regulate major Financial Firms.
Though it is a big Shock in the financial system, There are many villains in this story, like Credit Rating Agencies, Shareholders of IL&FS, Govt, and regulators.
Govt Moved to NCLT and set up a new board. 8 October is a big day for this new board as they need to take a meeting and discuss what is required. Uday Kotak, Vineet Nayyar from Former IAS officer and Tech Mahindra Boss, Former SEBI Chief G N Bajpai, Former ICICI Bank Chairman G C Chaturvedi, Former IAS officer Malini Shankar and Nanda Kishore. This case will be a case study for many years.
