• About us
  • Careers
  • Brand Partnerships
TFI Official Merchandise
TFI हिन्दी
TFI Global
Monday, July 4, 2022
TFIPOST
  • Politics
    • All
    • Analysis
    • Opinions
    • Trending
    India all set to be a semiconductor giant very soon

    India all set to be a semiconductor giant very soon

    Kaali Poster: Is this not “Blasphemy”?

    Kaali Poster: Is this not “Blasphemy”?

    Captain Amarinder Singh is a bad choice for the post of VP

    Captain Amarinder Singh is a bad choice for the post of VP

    Dear Supreme Court, at least listen to your ex-colleagues

    Dear Supreme Court, at least listen to your ex-colleagues

    • Analysis
    • Opinions
    • Trending
  • Economy
    • All
    • Business
    • Economy1
    • Finance
    Ola did everything right except one – Respect the fundamentals. Now it’s going bankrupt

    Ola did everything right except one – Respect the fundamentals. Now it’s going bankrupt

    crude

    By slapping export duty on fuels, the Modi government is playing the role of protector

    BYJU’s

    BYJU’s on the road to become the next SAHARA….

    MSMEs and Exports-Two drivers of India’s $5 trillion economy

    MSMEs and Exports-Two drivers of India’s $5 trillion economy

    • Business
    • Finance
  • Defense
    • All
    • Defence
    • Strategy
    • Weaponry
    Simla Agreement: How India won every war on the ground, but lost badly on the table

    Simla Agreement: How India won every war on the ground, but lost badly on the table

    unmanned flight

    India boosts its Air Supremacy with the testing of the Ghatak stealth drone

    Reason why India will reject Biden’s offer to co-develop AMCA engines

    Reason why India will reject Biden’s offer to co-develop AMCA engines

    Tejas Egypt

    India takes a giant step as a defence manufacturer with its Tejas deal with Egypt

    • Defence
    • Strategy
    • Weaponry
  • Geopolitics
    • All
    • Africa
    • Americas
    • Asia Pacific
    • Europe
    • South Asia
    • West Asia
    USCIRF flashed the religious freedom card again, got slammed by India

    USCIRF flashed the religious freedom card again, got slammed by India

    With one move of Piyush Goyal, the US is whining like sissy babies

    With one move of Piyush Goyal, the US is whining like sissy babies

    Boris Johnson Khalistani

    Decoding the hidden agenda behind Boris Johnson’s sympathy for Khalistani activist

    G20 is ours, the venue is Kashmir, but it aches the bleeding hearts of China and Pakistan

    G20 is ours, the venue is Kashmir, but it aches the bleeding hearts of China and Pakistan

    • Africa
    • Americas
    • Asia Pacific
    • Europe
    • South Asia
    • West Asia
  • Knowledge
    • All
    • Culture
    • History
    • Indology
    Saptarishi image painting

    Saptarishi: The guiding force of humanity

    copper weapons

    The excavations in Mainpuri’s Ganeshpur village illustrate Hindus’ sophisticated weaponry

    Gondya Ala Re – 125 Years of Chapekar Brothers’ Supreme Will

    Gondya Ala Re – 125 Years of Chapekar Brothers’ Supreme Will

    History

    Government shouldn’t have removed Mughal references from NCERT books, it should have published the truth

    • Culture
    • History
    • Indology
  • Lounge
    • All
    • Books
    • Cinema
    • Food
    • Health
    • Lifestyle
    • Satire
    • Sports
    • technology
    • Travel
    Welcome to Pakistan – The World’s largest dumping yard

    Welcome to Pakistan – The World’s largest dumping yard

    Rocketry review: The nation would be forever indebted to R. Madhavan

    Rocketry review: The nation would be forever indebted to R. Madhavan

    Bollywood feels threatened by the emerging multilingual cinema, and they should be

    Bollywood feels threatened by the emerging multilingual cinema, and they should be

    Manmohan is overrated, Joe Biden is the real robot

    Manmohan is overrated, Joe Biden is the real robot

    • Books
    • Cinema
    • Food
    • Health
    • Sports
    • technology
    • Travel
    • Satire
  • Premium
No Result
View All Result
TFIPOST
  • Politics
    • All
    • Analysis
    • Opinions
    • Trending
    India all set to be a semiconductor giant very soon

    India all set to be a semiconductor giant very soon

    Kaali Poster: Is this not “Blasphemy”?

    Kaali Poster: Is this not “Blasphemy”?

    Captain Amarinder Singh is a bad choice for the post of VP

    Captain Amarinder Singh is a bad choice for the post of VP

    Dear Supreme Court, at least listen to your ex-colleagues

    Dear Supreme Court, at least listen to your ex-colleagues

    • Analysis
    • Opinions
    • Trending
  • Economy
    • All
    • Business
    • Economy1
    • Finance
    Ola did everything right except one – Respect the fundamentals. Now it’s going bankrupt

    Ola did everything right except one – Respect the fundamentals. Now it’s going bankrupt

    crude

    By slapping export duty on fuels, the Modi government is playing the role of protector

    BYJU’s

    BYJU’s on the road to become the next SAHARA….

    MSMEs and Exports-Two drivers of India’s $5 trillion economy

    MSMEs and Exports-Two drivers of India’s $5 trillion economy

    • Business
    • Finance
  • Defense
    • All
    • Defence
    • Strategy
    • Weaponry
    Simla Agreement: How India won every war on the ground, but lost badly on the table

    Simla Agreement: How India won every war on the ground, but lost badly on the table

    unmanned flight

    India boosts its Air Supremacy with the testing of the Ghatak stealth drone

    Reason why India will reject Biden’s offer to co-develop AMCA engines

    Reason why India will reject Biden’s offer to co-develop AMCA engines

    Tejas Egypt

    India takes a giant step as a defence manufacturer with its Tejas deal with Egypt

    • Defence
    • Strategy
    • Weaponry
  • Geopolitics
    • All
    • Africa
    • Americas
    • Asia Pacific
    • Europe
    • South Asia
    • West Asia
    USCIRF flashed the religious freedom card again, got slammed by India

    USCIRF flashed the religious freedom card again, got slammed by India

    With one move of Piyush Goyal, the US is whining like sissy babies

    With one move of Piyush Goyal, the US is whining like sissy babies

    Boris Johnson Khalistani

    Decoding the hidden agenda behind Boris Johnson’s sympathy for Khalistani activist

    G20 is ours, the venue is Kashmir, but it aches the bleeding hearts of China and Pakistan

    G20 is ours, the venue is Kashmir, but it aches the bleeding hearts of China and Pakistan

    • Africa
    • Americas
    • Asia Pacific
    • Europe
    • South Asia
    • West Asia
  • Knowledge
    • All
    • Culture
    • History
    • Indology
    Saptarishi image painting

    Saptarishi: The guiding force of humanity

    copper weapons

    The excavations in Mainpuri’s Ganeshpur village illustrate Hindus’ sophisticated weaponry

    Gondya Ala Re – 125 Years of Chapekar Brothers’ Supreme Will

    Gondya Ala Re – 125 Years of Chapekar Brothers’ Supreme Will

    History

    Government shouldn’t have removed Mughal references from NCERT books, it should have published the truth

    • Culture
    • History
    • Indology
  • Lounge
    • All
    • Books
    • Cinema
    • Food
    • Health
    • Lifestyle
    • Satire
    • Sports
    • technology
    • Travel
    Welcome to Pakistan – The World’s largest dumping yard

    Welcome to Pakistan – The World’s largest dumping yard

    Rocketry review: The nation would be forever indebted to R. Madhavan

    Rocketry review: The nation would be forever indebted to R. Madhavan

    Bollywood feels threatened by the emerging multilingual cinema, and they should be

    Bollywood feels threatened by the emerging multilingual cinema, and they should be

    Manmohan is overrated, Joe Biden is the real robot

    Manmohan is overrated, Joe Biden is the real robot

    • Books
    • Cinema
    • Food
    • Health
    • Sports
    • technology
    • Travel
    • Satire
  • Premium
No Result
View All Result
TFIPOST
No Result
View All Result

How a government panel led by Uday Kotak solved the IL&FS Debt Crisis

Abhinav Singh
by Abhinav Singh
23 September 2021
in Trending
0
Uday Kotak, Evergrande, IL&FS, Debt, Financial

PC: The Financial Express

1.2k
VIEWS
Share on FacebookShare on Twitter

Government of India on Wednesday (September 22) extended the term of Uday Kotak, chairman of Kotak Mahindra Bank as the non-executive chairman of debt-ridden Infrastructure Leasing and Financial Services Ltd (IL&FS) group by another six months. Uday’s tenure was supposed to end on October 2 but the government through a gazette notification extended the tenure.  

Kotak’s extension comes a day after he talked about Chinese company Evergrande and how it reminded him of the IL&FS crisis. In the tweet, Kotak remarked that a 61 per cent recovery of outstanding debt had been observed at IL&FS.

Uday Kotak tweeted, “Evergrande seems like China’s Lehman moment. Reminds us of IL&FS. Indian Government acted swiftly. Provided calm to financial markets. The Government appointed board estimates 61% recovery at IL&FS. Evergrande bonds in China trading ~ 25 cents to a $,” 

Evergrande seems like China’s Lehman moment. Reminds us of IL&FS. Indian Government acted swiftly. Provided calm to financial markets. The Government appointed board estimates 61% recovery at IL&FS. Evergrande bonds in China trading ~ 25 cents to a $.

— Uday Kotak (@udaykotak) September 21, 2021

A thankless task

Kotak’s extension is indeed laudable as he is undertaking what is undoubtedly a difficult, underappreciated, and thankless task. IL&FS at one time threatened to be India’s Lehman moment, capable of triggering a collapse in the economy. However, the Modi government with its all ‘hands on the deck’ approach quickly accessed the gravity of the crisis and jumped in with its resources. 

Uday Kotak was appointed by the government as the head of the lender’s board which also included Tech Mahindra Vice-Chairman, Managing Director and CEO Vineet Nayyar, former Sebi chief G N Bajpai, former ICICI Bank chairman G C Chaturvedi, former IAS officers Malini Shankar and Nand Kishore in 2018 to help the troubled company wade through the rough waters.

Reportedly, under his tenure, the centre-appointed board discovered that there was a complex web of over 250 companies that were part of the overall IL&FS group. Over 90 per cent of the flagship company’s assets were classified as a dud. 

The Genesis 

IL&FS is a non-banking financial company (NBFC), or ‘shadow bank’ that was founded in 1987 with equity from Central Bank of India, Unit Trust of India and Housing Development Finance Co to fund infrastructure projects when peers IDBI and ICICI were focused more on corporate projects. For a layman, Shadow Bank is a term used to refer to intermediaries in the banking and finance segment that provide similar services as that of traditional banks, however, they are not under similar regulation.

IL&FS’s major shareholders include Life Insurance Corp of India holding 25.3% stake, State Bank of India with 6.42%, Japan’s Orix Corp holding 23% and the Abu Dhabi Investment Authority with 12%. 

However, the company defaulted in payment obligations of bank loans (including interest), term and short-term deposits and failed to meet the commercial paper redemption obligations. 

A debt of 94,000 crores

Succinctly put, with a consolidated debt of around Rs 94,000 crores, the company was simply unable to find resources to pay its debt and found itself in an asset-liability mismatch. More than 60 per cent of the debt owed by the company was in the road building, power and water work projects.

Following the defaults, rating agency ICRA downgraded the ratings of its short-term and long-term borrowing programs. The defaults also jeopardised hundreds of investors, banks, and mutual funds associated with IL&FS, and sparked panic among equity investors, even as several non-banking financial companies faced turmoil amid a default scare. 

Ripple effect of IL&FS’s default

Such was the ripple effect of IL&FS’s default that an entertainment media giant like Zee Entertainment Enterprises Ltd (ZEEL) nearly ran itself into the ground. The IL&FS default resulted in the freezing of already shallow domestic debt markets even as it sent shockwaves into the financial system in a domino effect. 

As reported by TFI, Sony and Zee signed a merger deal on Wednesday after the latter’s debt as of March 2021 stood at Rs 3.17 billion. Zee was among the most profitable and professionally run companies. However, the investments of the Zee group in the infrastructure market went truly south due to the collapse of IL&FS. 

The banks tightened lending norms after the collapse of the IL&FS Group and this led to a massive crisis in the NBFC market. As the investment of the Zee group was exposed to NBFCs, it led to a sharp decline in the share prices of the Zee group. 

Even former Chairman Subhash Chandra pointed out the accumulation of debt to the collapse of IL&FS, “I had admitted the wrong decisions taken by me in the past which caused the occurrence of the default, due to the asset-liability mismatch. Goes without saying, that it was an after-effect of the liquidity crisis triggered by the IL&FS case,” 

 Read More: Sony-Zee merger: The mother of all entertainment genre mergers is here

Comparisons between Evergrande and IL&FS

Reported extensively by TFI, China’s real estate giant Evergrande’s dipping fortunes could ultimately affect everything from the jobs market to property prices in the country. This is why Fitch Ratings and Moody’s Investors Service seem to have issued warning signs about the likelihood of a default by the Evergrande Group. 

Chinese stock markets seem to agree with the larger risks attached to Evergrande Group’s default. They fear a contagion effect from Evergrande’s debt default hitting the property and banking sectors. This contagion effect has escalated the risks associated with investments inequities. 

Evergrande’s default has also triggered worries of similar financial troubles gripping other big property developers and causing further mayhem in the Chinese economy. Evergrande, which employs 200,000 people, has a presence in more than 280 cities and claims to indirectly generate 3.8 million Chinese jobs, had been on a reckless buying spree for more than a decade, which appears to have caught up now. Regulators have warned that it is $305 billion of liabilities could spark broader risks to China’s financial system if its debts are not stabilised.

Read More: Evergrande topples, crushes China’s markets under its weight

While Evergrande is purely a market failure and its market resolution — while it may or may not yet require Chinese government intervention given its scale, IL&FS was a monster created by India’s Nehruvian quasi-socialist past and the red-tapism of the bureaucracy, which came to full effect when the audits in the aftermath of the crisis were found to be botched as well. 

Tags: EvergrandeIL&FSNBFCsony entertainment televisionSubhash ChandraUday KotakZee Entertainment Enterprises
Share71TweetSend
Previous Post

NCERT curriculum is finally going to change, a move that can undo decades of misinformation

Next Post

Zero Bridge Srinagar: History and Signifiance

Abhinav Singh

Abhinav Singh

Here to fulfill Ra's al Ghul's Destiny

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms of use and Privacy Policy.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

  • Most Read
  • Comments
  • Latest
Xi Jinping, coronavirus, Shinzo Abe, china, Japan, coornavirus, COVID-19, Wuhan Virus

‘Pack up and get out of there,’ Japan to spend $2.2 billion to get Japanese companies to exit China

9 April 2020
ajay devgn karan johar

The man who bullied the Bully – How Ajay Devgn made Karan Johar’s monopoly a joke and forced him to apologize

22 June 2020
Huawei, China, Trump, USA, Xi Jinping

‘Our survival is at stake now,’ Chinese Telecom giant Huawei crumbles after US ban on Semiconductor exports

19 May 2020
T-Series Sonu Nigam Divya Khosla Kumar Bhushan Kumar

T-Series forced to take down Atif Aslam’s video, Divya Khosla trolled. T-Series has a bad day in office

25 June 2020
Meat Ban

A Jain responds to Meat Ban in Mumbai

Public Sector Bank, Government, Bill

Dear bank employees, continue your stride but PSBs will be privatized

anti-Hindi

Anti-Hindi Forever?- In search of a National Language!

Dear Liberals – your Beef Parties are not protests, they just intend to displease the Majority

Dear Liberals – your Beef Parties are not protests, they just intend to displease the Majority

India all set to be a semiconductor giant very soon

India all set to be a semiconductor giant very soon

4 July 2022
Kaali Poster: Is this not “Blasphemy”?

Kaali Poster: Is this not “Blasphemy”?

4 July 2022
Ola did everything right except one – Respect the fundamentals. Now it’s going bankrupt

Ola did everything right except one – Respect the fundamentals. Now it’s going bankrupt

4 July 2022
Captain Amarinder Singh is a bad choice for the post of VP

Captain Amarinder Singh is a bad choice for the post of VP

4 July 2022

Popular This Week

BYJU’s
Analysis

BYJU’s on the road to become the next SAHARA….

by Rahul Gupta
1 July 2022
Bollywood Thackeray
Politics

Why Bollywood is afraid of Devendra Fadnavis’ return to Maharashtra

by Apoorva Shukla
25 June 2022
Tejas Egypt
Defense

India takes a giant step as a defence manufacturer with its Tejas deal with Egypt

by Rahul Gupta
28 June 2022
Tejas LCA
Defence

Malaysia wants India’s Tejas LCA at any cost

by Rahul Gupta
25 June 2022
Zubair TFI Connection
Premium

The story of Mohammed Zubair that no media portal can tell you about

by TFIPOST News Desk
29 June 2022

©2022 TFI Media Private Limited

  • Terms of use
  • Privacy Policy
  • Sitemap
No Result
View All Result
  • Politics
    • Analysis
    • Opinions
    • Trending
  • Economy
    • Business
    • Finance
  • Defense
    • Defence
    • Strategy
    • Weaponry
  • Geopolitics
    • Africa
    • Americas
    • Asia Pacific
    • Europe
    • South Asia
    • West Asia
  • Knowledge
    • Culture
    • History
    • Indology
  • Lounge
    • Books
    • Cinema
    • Food
    • Health
    • Sports
    • technology
    • Travel
    • Satire
  • Premium
TFI Official Merchandise
TFI हिन्दी
TFI Global
  • About us
  • Careers
  • Brand Partnerships

©2022 TFI Media Private Limited

Follow us on Twitter

and never miss an insightful take by the TFIPOST team

Follow @tfipost