Case Analysis: Infrastructure Leasing & Financial Services Limited Scandal, 2018
- IJLLR Journal
- May 3
- 1 min read
Ria Gulati, BA LLB, Symbiosis Law School, Nagpur (SIU)
INTRODUCTION
Background:
The Infrastructure Leasing & Financial Services Limited (IL&FS) Scandal of 2018 is considered to be one of the most significant corporate frauds in the Indian Financial sector. The IL&FS, an important non-banking financial company associated with the Reserve Bank of India was established in the year 1987 to encompass infrastructure financing and development. It operated through various subsidiaries which included diverse sectors such as energy, transportation, and other financial services. The company took loans to invest into a plethora of infrastructure developments. However, due to mismanagement, negligence, and financial oversight led to defaults in repayments which eventually resulted into systematic risks in Indian economy.
Facts:
The company had amassed a total debt of approximately Rs.91,000 crore, along with, Rs.57,000 crore from public sector lenders by the year 2018.
Between July-September 2018, IL&FS including their subsidiaries defaulted on various debt obligations, which included inter-corporate debts and short-term loans which indicated severe liquidity issues.
In furtherance to this, the credit rating agencies had demoted the status of the company’s debt instruments from high to low, which reflected the company’s deteriorating financial health.
