Government Says IL&FS Downfall Largely Due To Wrong Decisions Before 2014: 10 Points

1. The IL&FS Group, especially its subsidiaries IL&FS Engineering and Construction Company (IL&FS Engineering) and IL&FS Transportation Networks, entered into major problems beginning 2012, the government said in its statement on Monday.
2. Those problems led to massive delays in execution of projects and a number of projects had become stalled infrastructure projects even before 2014, it said.
3. "This affected their financial performance and significantly increased the leveraging as delayed projects were kept afloat by more and more debt financing," it added.
4. The statement from the government came within hours after the NCLT ordered suspension of the existing IL&FS board, and allowed a six-member government-appointed team to take control of the debt-ridden company.
5. IL&FS has a debt pile of more than Rs 91,000 crore. In the past few weeks, a series of defaults by IL&FS Group companies and credit rating downgrades have affected the capital markets. IL&FS' rapid fall from grace has sparked fears that its troubles could cause a crisis in the non-banking financial services (NBFC) sector.
6. Describing the company's debt pile as "the outcome of its mismanaged borrowings in the past", the government said it stands fully committed to ensure that needed liquidity is arranged for IL&FS from the financial system "so that no more defaults take place and the infrastructure projects are implemented smoothly".
7. Replacement of the existing management appeared to be the "most necessary and immediately required" step, it said. "The high debt stress was clearly visible in the company and its main subsidiaries for the last so many years, but was camouflaged by misrepresentation of facts."
8. "The current IL&FS crisis could have an adverse impact on the financial stability of the economy," a government lawyer told the tribunal. 
9. IL&FS Transportation Network witnessed significant erosion of profit starting from 2012-13 while its net debt also increased more than two times, from Rs 13,939 crore to Rs 29,961 crore in 2017-18.
10. Monday's development came a day after IL&FS announced that its shareholders had approved a plan to raise funds via debt and equity issuances.

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