Indian Govt takes over indebted lender IL&FS
NEW DELHI, Oct 1: The government will immediately seize control of a shadow lender whose defaults have caused widespread upheaval at mutual funds, a rebuke that’s only happened to one other firm.
Officials were granted approval to oust Infrastructure Leasing & Financial Services Ltd.’s board and a new six-member board will meet before Oct. 8, the National Company Law Tribunal said on Monday. India’s richest banker Uday Kotak and ICICI Bank Chairman GC Chaturvedi will be part of the proposed board, which will elect a chairperson themselves. The nation’s corporate affairs ministry has sought to take control of a company on just two prior occasions, and only followed through once, with Satyam Computer Services Ltd. in 2009.
The dramatic move, which unfolded within the span of a hectic day in Mumbai, underscores the government’s concern about IL&FS’s defaults spreading to other lenders in the world’s fastest-growing major economy. Considered systemically important, the group has total debt of $12.6 billion, 61% in the form of loans from financial institutions. The ripple effects of its defaults have already seen mutual funds post mark-to-market losses, a slump in corporate bond issuance and a brief but sharp sell-off in equities.
“The solution would need to address how to prevent massive write downs by the banks, not merely by regulatory engineering -- as that would simply defer the real problem by a few years,” said Krishnava Dutt, a managing partner at law firm Argus Partners. “As I see it, someone now needs to bite the bullet.”
The National Company Law Tribunal will next hear the matter on Oct. 31.
Shares of the group’s listed subsidiaries climbed in Mumbai. IL&FS Transportation Networks Ltd., which develops and maintains toll highways, surged nearly 19 percent to close at 26.80 rupees, paring the year’s slump to 68%. Fund manager IL&FS Investment Managers Ltd. advanced about 10 percent.
The new board will inherit a restructuring process that just saw IL&FS shareholders sign off on a non-convertible debt sale, a higher borrowing limit and a rights offering. Some bankers to IL&FS have been hesitant to provide fresh cash injections without more details on asset sales, people familiar with the matter have said.
The beleaguered group can raise 600 billion rupees by selling assets, according to its biggest shareholder Life Insurance Corp. of India. The nation’s largest life insurer is open to subscribing to IL&FS’s rights offer, LIC Chairman V.K. Sharma said last week.
Other investors in IL&FS include Japan’s Orix Corp., the second-largest shareholder in the company, Abu Dhabi Investment Authority and Housing Development Finance Corp., India’s biggest mortgage lender.
“Dismissal of the IL&FS board will raise uncertainty on the firm’s plans to sell off assets and pay off debtors,” Sunil Pachisia, vice president at brokerage Pratibhuti Viniyog, said by phone. “There is a fear that the lenders may have to take deeper hair cuts once the government steps in.”
IL&FS funds infrastructure projects across Asia’s third-largest economy. Its defaults on commercial paper, once considered rock-solid, from August sparked concern among households holding mutual funds invested in such debt, and forced banks, mutual and pension fund managers to brace for further losses.
There was also concern that the group’s troubles could spread to other shadow banks and crimp Prime Minister Narendra Modi’s infrastructure plans before elections next year.
DLF CEO Rajeev Talwar takes over Presidency of PHD Chamber
NEW DELHI, Oct 1: Chief Executive Officer & Member of the Board of Directors of DLF Ltd. Rajeev Talwar has taken over the presidency of PHD Chamber of Commerce and Industry following the conclusion of its 113th Annual Session. Prior to becoming the President of the PHD Chamber, Talwar was its Senior Vice President.
He is a post graduate and a graduate from St. Stephens College, Delhi University. He started his career in 1976, as a Banker with State Bank of India as a Probationary Officer and was subsequently selected for the Indian Administrative Service in 1978.
During his tenure as an IAS officer from 1978 to 2006, Talwar held many important and critical positions in the Central and State Governments as well as Union Territories.
Over a decade, during his association with DLF, Talwar spearheaded country’s largest IPO (USD 2.2 bn.) and various public policies pertaining to the sector and economy, besides being vocal on various fora he has been actively pursuing issues and challenges confronted by the sector.
Talwar is also the Chairman of the National Real Estate Development Council. He is also the Vice Chairman of World Tourism & Travel Council, India Initiative and will take over as the Chairman of the Council in December 2018.