UPDATED 1.04pm on 1 Oct 2018
The Indian government has finally decided to intervene in the Infrastructure Leasing & Financial Services Ltd (IL&FS) issue by moving to the National Company Law Tribunal (NCLT) for changing management at debt-ridden conglomerate, says media report.
R report from CNBC-TV18 says, the government has proposed to dissolve entire board of IL&FS and appoint 10 new directors with Uday Kotak as its non-executive chairman.
Quoting sources, the report, says, "Foreign shareholders are hesitant in putting more money unless there is a change in the management. Domestic shareholders have also expressed their concerns in lending to the same management at the helm and the government is looking to supersede the IL&FS board."
Sources from the company told the news channel that IL&FS will support and co-operate with the government and the NCLT application will help the company in an early resolution of its pending issues.
’s editor Debashis Basu, in his column in the Business Standard
has expressed the need for a three-point surgical strike in the IL&FS scam. This includes, immediately getting a new leadership, start selling assets through competitive bids and dismantling IL&FS, he wrote.
Last month, Moneylife had pointed out the need to sack incumbent board at IL&FS. "Equity infusion by shareholders is unlikely to be enough to address the problem it faces.
The government needs to have a strong team in place to take charge of IL&FS and make an honest assessment of the situation," Sucheta Dalal, managing editor of Moneylife, wrote last month. (Read: Sack IL&FS Board To Fix the Mess
The Reserve Bank of India (RBI), which classifies IL&FS as a systemically important non-banking finance company, has ordered a special audit, only after it began to default.
RBI’s inspection report pointed out “that the net-owned funds of the finance company had been wiped out and that it was over-leveraged.”
RBI is the banking regulator and IL&FS is designated a systemically important finance company. Yet, we are told that it ‘declined to take corrective measures’.
This was followed by other defaults and a series of credit downgrades by rating agencies. The group debt is currently estimated at Rs1.2 lakh crore and what we have seen so far are tiny ineffectual steps by the board. It is nowhere up to the task of resolving a giant problem that is, once again, likely to need a bailout by the public through the exchequer.