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What is IL&FS crisis and why it happened ?

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Infrastructure Leasing & Financial Services Limited (IL&FS) is an Indian infrastructure development and finance company.

It operates through more than 250 subsidiaries including IL & FS Investment managers, IL & FS financial services and IL & FS Transportation networks India Limited (ITNL). Its projects include some of the largest infrastructure projects in India including India’s longest tunnel, Chennai-Nashri Tunnel, which was opened for traffic in April 2017.


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), to provide finance and loans for major infrastructure projects. Gradually, as the organization needed better financing, it additionally opened itself to two large international players, namely Mitsubishi (through Orix corporation Japan) and the Abu Dhabi Investment Authority. Subsequently, Life Insurance Corporation India, Orix, and ADIA became its largest shareholders, a pattern that continues to this day.

Currently, its institutional shareholders include Life Insurance Corporation of India (LIC), ORIX and Abu Dhabi Investment Authority, with small shareholdings by a few Indian banksState Bank of India (SBI) was a shareholder till 2017, after which it sold its stake in the company. A few foreign investors including Greenspring associates remain investors in its subsidiary companies, especially IL&FS transportation and IL&FS infrastructure services.

In 2012, A2Z Group acquired the property management subsidiary of IL & FS (IL&FS Property Management & Services Ltd) in a cash and stock deal. The deal was done through its subsidiary A2Z Infraservices Ltd for Rs250 million. While Rs70 million cash payment was made to IL&FS Infrastructure Equity Fund and IL&FS Employees Welfare Trust, the infrastructure major also took a 20% stake in A2Z Infraservices by way of a stock swap.

Group companies

IL&FS headquarters at the Bandra Kurla Complex in Mumbai

IL&FS has 256 group companies as of 2018, including subsidiaries, joint venture companies, and associated entities. Though on the surface, the company appears to have 23 direct subsidiaries, 141 indirect subsidiaries (including special purpose vehicles for different projects), 6 joint ventures and 4 associate companies, each of them is further subdivided into additional legal entities, with much cross-ownership as well as ownership by investment vehicles of various governments.

Some of them are listed below-

Infrastructure Services
  • IL&FS Infrastructure Development Corporation Limited: advisory and project development
  • IL&FS Transportation Networks Limited: involved in the development and implementation of projects related to surface transport (highways, flyovers, bridges, and roads)
  • IL&FS Environmental Infrastructure & Services Limited
  • IL&FS Education and Technology Services Limited (education infrastructure development)
  • New Tirupur Area Development Corporation Limited (an SPV to implement the Tirupur Area Development Programme)
  • Noida Toll Bridge Company Limited (an SPV to develop, construct, operate and maintain the DND Flyway connecting Delhi with Noida)
Financial Services
  • IL&FS Financial Services Limited (Investment Banking Arm of IL&FS)
  • IL&FS Investment Managers Limited (domestic private equity fund management)
  • ORIX Auto Infrastructure Services Limited (services related to transport finance and transport infrastructure)
  • IL&FS Trust Company Limited – ITCL (Services: * Debenture and Bond Trusteeship * Trusteeship and Investor Representative for Securitised Paper * Services as Security Trustee and Facility Agent * secure document management, scanning, processing, Records management solution * Para Legal Services)
Technology Services
  • IL&FS Technologies Ltd. (IT Arm of IL&FS group)

IL&FS Technologies Ltd.(known as ITL) is the IT Branch of IL&FS Group. It is a complete end-to-end technology solutions company offering consulting, software development, systems integration, data digitization, and management service and solutions, performance tuning solutions and IT infrastructure management services to global customers.


IL&FS has several projects in different sectors including Transportation, Area Development, e-Governance, Health Initiatives, Cluster Development, Finance, Power, Ports, Water and Waste Water, Urban Infrastructure, Environment, Education, and Tourism.

In 2009, it became the new promoter of the Maytas Infra Ltd. and in January 2011, Maytas Infra was taken over by IL&FS and renamed to IL&FS Engineering and Construction Company Limited In September 2009, it picked up a “significant minority stake” in the Reliance Industries‘ special economic zone project in Haryana.

IL & FS was the principal lender behind the construction of the 9.28 km long Chennai-Nashri Tunnel, located on the route of NH 44 in Jammu and Kashmir. Its work was started on July 2011 and the tunnel was opened for traffic after its inauguration by the Indian Prime Minister Narendra Modi on 2 April 2017. Built on an estimated budget of ₹3,720 crore (US$550 million), the main tunnel is 13 meters in diameter, while the parallel escape tunnel is 6 meters in diameter. The main and escape tunnels are connected by 29 cross passages located at intervals of every 300 meters. It is the first tunnel in India with a fully integrated tunnel system and is expected to reduce the distance between Jammu and Srinagar by 30.11 km (18.7 mi), reducing the travel time by two hours.

IL & FS also has large investments in its own subsidiaries, as well as in the equity market. In September 2018, these amounted to nearly Rs. 10,000 crores.


As of March 2018, the largest shareholders of IL & FS Investment services were as follows

  • LIC: 25%
  • ORIX Corporation, Japan (a part of Mitsubishi Keiretsu): 23%
  • IL & FS Employees welfare trust: 12
  • Abu Dhabi investment authority: 12%
  • HDFC Ltd : 9
  • The central bank of India: 7%
  • State Bank of India: 6%

Defaults on bonds by IL & FS financial services

From July to September 2018, two out of IL & FS’s 256 subsidiaries reported having trouble paying back loans and inter-corporate deposits to other banks and lenders, resulting in the RBI requesting its major shareholders to rescue it. In July 2018, Hindu Businessline reported that the road arm of IL & FS was having difficulty making payments due on its bonds. In the same month, Business Standard reported that its founder Ravi Parthasarathy would be leaving the firm due to medical reasons, after having headed the firm for 30 years.

In early September 2018, Moneylife India reported that one of IL & FS’s subsidiaries had been unable to repay an Rs. 1000 crore short-term load is taken from SIDBI, resulting in SIDBI asking one of its officers to resign. Subsequently, Bloomberg Quint, Business standard and Economic Times reported that one of the IL & FS group of companies called IL & FS Financial services limited had defaulted on its commercial paper payments. This led to news of a possible audit by the Reserve bank of India. IL&FS Financial Services Ltd., one of the group’s many financial subsidiaries had defaulted on repaying about Rs. 450 crore worth of inter-corporate deposits to Small Industries Development Bank of India (SIDBI). On 27 September 2018, IL & FS Financial services informed the BSE that it had defaulted on an Rs 52.4-crore repayment of short-term deposits and Rs 104-crore term deposit.

However, in it’s replying to investors and the BSE, IL&FS investment services (IVC) clarified that the news items did not relate to it, as these were two completely different legal entities. A similar letter was published by IL & FS Transportation.

On 1st Oct 2018, the Government of India took steps to take control of the company and arrest spread of the contagion to the financial markets. A new board was constituted as the earlier board was deemed to have failed to discharge its duties. The new board consists of Kotak Mahindra Bank managing director Uday Kotak, former IAS officer & Tech Mahindra boss Vineet Nayyar, former Sebi chief G N Bajpai, former ICICI Bank chairman G C Chaturvedi, former IAS officers Malini Shankar and Nand Kishore.

Serious Fraud Investigation Office (SFIO) started an investigation as there were huge procedural lapses and top management was not reachable. Newspapers reported the lavish salaries management gave itself at the expense of the public money. In the absence of adequate supervision by RBI or shareholders or any claw-back provisions on remuneration, the management treated the company as its fiefdom.

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  1. Very Useful Information about ILFS … Love it truly

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