The Congress on Sunday stepped up its attack on the Central government, with party President Rahul Gandhi alleging that public money was being used to bail-out the debt-ridden IL&FS group.
In a tweet, Gandhi alleged that Prime Minister Narendra Modi is bailing out the IL&FS group which has a long-term debt liability of around Rs 91,000 crore via public savings in LIC and the State Bank of India (SBI).
The tweet in Hindi titled “Lights, Camera, Scam”, alleges that in 2007 when Modi was the Gujarat Chief minister, IL&FS was given the ‘GIFT CITY’ project worth Rs 70,000 crore. Till date no work has been achieved under the plan.
Gandhi adds that in 2018, Modi was bailing out the same company via LIC an SBI.
Recently, the Congress has raised the issue and warned of “an impending ‘Lehman Brothers-type’ economic crisis facing the country”.
The IL&FS crisis has also dented equity investors confidence in the entire NBFC space.
Besides, the party has called for a forensic audit of the group over the disbursement of Rs 42,000 crore in the last four years.
Congress spokesman Manish Tiwari also tweeted on Sunday: “This is why IL&FS financials need to be forensically audited as management, principal shareholders and NDA/BJP government are unwilling to address the 42,000 crore question Peruse second Graphic minutely. Rs 42,000 crore was disbursed in past four years. Nobody knows where the money disappeared.”
The call for an audit comes at a time, when concerns have been raised regarding the financial stability of the group after some of its subsidiaries defaulted on commercial paper repayment obligations.
In addition, the party has said that public savings via LIC and SBI should not be used to bailout the private entity in which foreign institutions have a stake.
On Saturday, the cash-strapped company said it was planning to have a “successful” rights issue and would sell its assets to repay creditors.
The company in its Annual General Meeting sought shareholders’ permission to carry out its plans to recapitalise itself.
In a video shared by the company after the AGM, IL&FS MD Hari Sankaran said that the company addressed the concerns of shareholders to restore normalcy in its operations and proposed a three-point strategy.
“Number one, to have a successful rights issue which will generate and enable the company to recapitalise itself,” he said, adding that the company also proposes to sell assets in order to repay its creditors.
The third element of the strategy is “to get liquid allocation to support repayments of debtors till our assets sale begins”, he said.
IL&FS Financial Services, a group company, defaulted in payment obligations of bank loans (including interest), term and short-term deposits and failed to meet the commercial paper (CP) redemption obligations due on September 14.
On September 15, the company reported that it had received notices for delays and defaults in servicing some of the inter corporate deposits accepted by it.
Consequent to defaults, rating agency ICRA downgraded the ratings of its short-term and long-term borrowing programmes.
IL&FS Ltd is a core investment company and serves as the holding company of the IL&FS Group, with most business operations domiciled in separate companies which form an ecosystem of expertise across infrastructure, finance and social and environmental services.
Initially promoted by the Central Bank of India, Housing Development Finance Corporation Ltd and the Unit Trust of India, IL&FS was incorporated in 1987.
Over the years, it has inducted institutional shareholders including SBI, LIC, ORIX Corporation of Japan and Abu Dhabi Investment Authority (ADIA).
As on March 31, 2018, LIC and ORIX Corporation are the largest shareholders in IL&FS with their stakeholding at 25.34 per cent and 23.54 per cent, respectively. Other prominent shareholders include ADIA (12.56 per cent), HDFC (9.02 per cent), CBI (7.67 per cent) and SBI (6.42 per cent).