The Price Of Profligacy

Can the governments intervention to save systemically important IL&FS shore up its prospectsand prevent a larger NBFC meltdown?

- M.G. Arun

In his nearly three-decade stint with Infrastructure Leasing & Financial Services (IL&FS) what distinguished Ravi Parthasarathy from other CEOs was his ability to take a decision and stick to it. What he built in the process was an institution with annual revenues of close to Rs 19,000 crore. It was acknowledged as a pioneer in public-private partnerships (PPP) in India, with expertise in execution of projects in sectors as diverse as roads, water, power, ports, area development and environmental infrastructure. That financial edifice looked impenetrable, till cracks appeared in the form of long-term liabilities, threatening the firm’s survival and rattling the stock markets.

In a surprise move, on October 1, the Centre replaced all board members by moving the National Company Law Tribunal (NCLT), as it attempted to calm the financial markets after the beleaguered infrastructure funding firm defaulted on its loans and threatened to shake up the entire NBFC (nonbanking financial companies) segment. A new six-member board led by Uday Kotak, vice-chairman and MD of Kotak Mahindra Bank, has taken over as a new phase begins for the firm.

THE GOLDEN YEARS