IL&FS CRISIS

About:

• Infrastructure Leasing & Financial Services Limited (IL&FS) is an Indian infrastructure development and finance company to provide finance and loans for major infrastructure projects.
  
  
• Background: IL&FS was formed in 1987 as an "RBI registered Core Investment Company" by three financial institutions owned by the government of India, namely the Central Bank of India, Housing Development Finance Corporation (HDFC) and Unit Trust of India (UTI).
  
  
• Ownership: As on March 31, 2018, LIC and ORIX Corporation of Japan are the largest shareholders in IL&FS with their stakeholding at 25 % and 23 %, respectively. Other prominent shareholders include Abu Dhabi Investment Authority (ADIA) (12 %), HDFC (9%),
  
  

Recent Crisis:

• The crisis in IL&FS started with a series of loan defaults in August and September by the company and some of its subsidiaries as it faced a severe liquidity crunch.
  
  
• The IL&FS Group has infrastructure and financial assets of over ₹1,15,000 crore but is facing tremendous debt pressure.
  
  
• Consequent to defaults, rating agency ICRA downgraded the ratings of its short-term and long-term borrowing programmes. The defaults also jeopardised hundreds of investors, banks and mutual funds associated with IL&FS. The defaults sparked panic among equity investors.
  
  

Recent decision:

• Government has superseded the Board with immediate effect and has inducted six directors in it. It will be headed by Uday Kotak, MD & CEO of Kotak Mahindra Bank as non-executive chairman,
  
  
• A probe by the Serious Fraud Investigation Office has also been ordered into IL&FS and its subsidiaries following complaints.
  
  
• The move was taken after a report from the Ministry of Corporate Affairs concluded that the affairs of the IL&FS holding company and its group companies were being conducted in a manner that was prejudicial to public interest