Infrastructure Leasing & Financial Services
Infrastructure Leasing & Financial Services Limited 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. Its projects include some of the largest infrastructure projects in India including India's longest tunnel, Dr. Syama Prasad Mookerjee Tunnel, which opened for traffic in April 2017.
After the company defaulted on its loans in 2018, the Government of India took control of the company and appointed a new board.
History
IL&FS was formed in 1987 as an "RBI registered Core Investment Company" by three financial institutions, namely the Central Bank of India, Housing Development Finance Corporation and Unit Trust of India, 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 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, ORIX and Abu Dhabi Investment Authority, with small shareholdings by a few Indian banks. State Bank of India was a share holder 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 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.
In April 2019, its newly constituted board informed investors that the company had 302 entities through which it currently operates.
Group companies
IL&FS has 256 group companies as of 2018, including subsidiaries, joint venture companies and associate entities. Though on the surface, the company appears to have 23 direct subsidiaries, 141 indirect subsidiaries, 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.While some of its subsidiaries ran into high losses in 2018 and found it difficult to repay their loans, others posted profits of Rs.725 million in 2018, a 33% profit after tax.
Some of them are listed below-
;Infrastructure Services
- IL&FS Energy Development Company Limited: energy sector arm involved in development of power generation and transmission projects
- 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
- IL&FS Environmental Infrastructure & Services Limited
- IL&FS Education and Technology Services Limited
- New Tirupur Area Development Corporation Limited
- Noida Toll Bridge Company Limited
- IL&FS Financial Services Limited
- IL&FS Investment Managers Limited
- ORIX Auto Infrastructure Services Limited
- IL&FS Trust Company Limited - ITCL
- IL&FS Technologies Ltd.
Projects
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 Dr. Syama Prasad Mookerjee 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, the main tunnel is 13 metres in diameter, while the parallel escape tunnel is 6 metres in diameter. The main and escape tunnels are connected by 29 cross passages located at intervals of every 300 metres. 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, 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.
Ownership
As of March 2018, the largest shareholders of IL & FS Investment services were as followsDefaults 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 share holders 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 a Rs. 1000 crore short term loan 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. On 27 September 2018, IL & FS Financial services informed the BSE that it had defaulted on a Rs 52.4-crore repayment of short-term deposits and Rs 104-crore term deposit.
However, in its replies to investors and the BSE, IL&FS investment services 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 the 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 consisted 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.
The Serious Fraud Investigation Office started an investigation as there were huge procedural lapses and top management was not reachable. Newspapers reported the lavish salaries management had given itself at the expense of 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.
On 2 April 2019, the SFIO arrested the former vice-chairman of IL&FS, Hari Sankaran, in Mumbai for fraud and causing wrongful loss to the troubled infrastructure lender. He was accused of granting loans to entities that were not credit-worthy or declared as non-performing accounts causing loss to the company and its creditors. The SFIO was granted custody of Sankaran till April 4.
The initial SFIO probe revealed that there were major lapses in Deloitte's audit of the IL&FS. The government had moved to ban Deloitte for its role in the default. However, the Bombay High Court passed an interim order to prevent "coercive action" by the government against the firm.
In April 2020 the Indian government's Corporate Affairs Secretary, Injeti Srinivas, said he expected to recover a substantial part of the company's Rs 94,000 crore debt. He said it was strange that nobody foresaw the problem, whether it was statutory auditors, independent directors and credit rating agencies.
On 8th June, 2020, IL&FS has concluded sale of its stake in GIFT City for 32 crore equity value. The sale would reduce its consolidated debt by more than 1200 crore.