Govt. Rescuing ILFS is Another Financial Scam Management: Congress

The cash-strapped Infrastructure Leasing and Financial Services (ILFS) group will be raising money by selling rights issues to its shareholders, it has been announced today after the group’s annual general body meeting. Meanwhile, Congress party has claimed that PM Narendra Modi’s government is attempting “financial scam management” to rescue ILFS at the behest of public money.

In a press briefing, Congress party leader Gourav Vallabh asserted that the proposed bailout of ILFS by its shareholders – Life Insurance Corporation of India (LIC) and State Bank of India (SBI) – is “just another classic example of how LIC and SBI are being forced by Prime Minister Modi for pilfering common man’s as well as public money by investing in a company whose top management has cheated millions of stakeholders by their fraudulent practices”.

“Why the government is jeopardising the savings of 38 crore LIC holders and crores of SBI depositors by burdening them with Rs 7,500 crore package for ILFS,” questioned Vallabh. The group’s total debt stood at Rs.91,091.3 crore, according to its consolidated balance sheet for the financial year 2018-19. As per media reports, the current maturity (debt to be repaid in one year) in FY18 is around Rs 25,000 crore. ILFS and its subsidiaries have been missing their debt repayment obligations since June this year.

Earlier, Newsclick had reported that the total investment of the LIC is only Rs 32 crore. LIC is the largest shareholder of the firm’s equity with a total 25.34 per cent shares, while Orix Corporation of Japan owns 23.5 per cent. Other shareholders include Abu Dhabi Investment Authority with 12.5 per cent stake, IL&FS Employees Welfare Trust with 12 per cent, HDFC with 9.02 per cent, Central Bank of India with 7.67 per cent and SBI with 6.42 per cent at the end of March this year.

“The management aims to bring the group back to normalcy by selling shares through a rights issue, paring assets to raise funds and by getting new credit lines to repay debt due soon,” Hari Sankaran, managing director of ILFS was quoted as saying after the group’s annual meeting. However, the group did not specify any further details of the plan. Reportedly, LIC, Orix and SBI have announced to subscribe to the proposed Rs 45 billion rights issue of the company. On September 28, the Reserve Bank of India held a meeting with the top shareholders of ILFS, and raised concerns over the current crisis of the group.

While it is emerging that the government and the public sector companies are in favour of lifting ILFS from its current financial crisis, the reasons for the crisis are yet to be revealed. A look at the consolidated balance sheet of the company shows that the massive debt has been raised in the recent years.

“The total debt of ILFS increased by a whopping Rs 42,420 crore in the last four years under Narendra Modi’s government. This means that ILFS’ debt was increasing at the rate of Rs 900 crore per month, piling to more than 91000 crores,” the Congress said in a statement.