InvestorQ : What is the progress on the IL&FS case and why is there no resolution to the problem?
Dia Deshpande made post

What is the progress on the IL&FS case and why is there no resolution to the problem?

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Ira Shah answered.
1 year ago

The problems at IL&FS manifested itself for the first time in July 2018 when IL&FS started to default on its commercial paper obligations. It eventually emerged that IL&FS was borrowing in the short term money market and giving long infrastructure loans. These loans were illiquid and when the money markets tightened, IL&FS could not borrow to repay old borrowings. That is when the problems at IL&FS began. 

However, the problem was not as simple as that. It emerged that there were massive frauds committed by top managers of the company and such money had been taken out of the company and transferred into private accounts. The big concern was that IL&FS was a systemic problem with nearly Rs.92,000 crore of loans outstanding. Recently, there have been two major developments in the IL&FS case. Let us look at these two developments in detail.

The Enforcement Directorate (ED) issued notices to two prominent political leaders in Maharashtra for their alleged involvement in the IL&FS case. IL&FS had apparently given a loan to invest in the equity shares of a company that had political affiliations. The two political leaders had apparently jointly bid for some assets by creating a consortium, which was later disbanded. This has become a high profile case due to some prominent political names coming into the limelight.

In another move, the ED has attached properties worth Rs.570 crore owned by the top brass of IFIN (IL&FS Financial Services) including Ravi Parthasarathy, Ramesh Bawa, Hari Shankaran and Arun Saha. These include residential and commercial properties spread across Mumbai, Delhi, Chennai, and Brussels. This attachment of properties was done under the Prevention of Money Laundering Act and is the first case of management personal properties being attached in a big way for a major corporate fraud. Most of these illegal gains were at a cost to the company and had eventually led to the fall of the company. According to ED, these senior directors had connived to lend to companies under heavy stress or on the verge of default in exchange for personal compensation. The last word on the IL&FS case is yet to be said.