Debt-Ridden IL&FS Taken Over by Govt, Uday Kotak and GC Chaturvedi to be Part of New Board
IL&FS has a total debt of $12.6 billion, 61 per cent of which is in form of loans. The massive debt pile-up has already caused a ripple effect in the mutual funds market.
Mumbai, October 1: Infrastructure Leasing & Financial Services Ltd's, referred to as IL&FS, has been taken over by the central government following the approval of the National Companies Law Tribunal on Monday. The debt-ridden non-banking financial firm will be governed by a new board -- whose members will be Kotak Mahindra Bank chief Uday Kotak and ICICI chairman GC Chaturvedi, among others.
IL&FS has a total debt of $12.6 billion, 61 per cent of which is in form of loans. The massive debt pile-up has already caused a ripple effect in the mutual funds market, along with a sudden sell-ff in equities and a plunge in corporate bond issuance. Rahul Gandhi Fires Fresh Salvo at Narendra Modi, Says IL&FS Means 'I Love Financial Scams' For PM.
Justifying the takeover, the Finance Ministry said the move was necessitated to safeguard investors' confidence in the restore confidence in the financial market and hoped that financial institutions would provide the NBFC liquidity.
"There is an emergent need to immediately stop further financial defaults and also take measures to resolve defaulted dues to the claimants.
"This would require a combination of measures of asset sales, restructuring of some liabilities and fresh infusion of funds by the investors and lenders. The confidence of the financial market in the credibility of the IL&FS management and the company needs to be restored," the ministry said.
Observing that the company continued to pay dividends and huge managerial pay-outs regardless of looming liquidity crisis, the statement said, "it shows that the management had lost total credibility."
While Uday Kotak has been appointed as the non-executive chairman of the new board by the government, the six board members will soon elect an official chairman.
(With agency inputs)
(The above story first appeared on LatestLY on Oct 01, 2018 07:11 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).