The board of Infrastructure Leasing & Financial Services (IL&FS), in its meeting on Saturday, decided to appoint former Life Insurance Corporation of India chairman S.B. Mathur as its new non-executive chairman, replacing Hemant Bhargava.
“The Board has unanimously appointed Mr. Sunil Behari Mathur, Independent Director and former chairman of Life Insurance Corporation of India as non-executive chairman of the company with immediate effect,” the firm said in a filing with the exchanges, adding that LIC MD Hemant Bhargava had stepped down from the board on September 15. Sources said Mr. Bhargava expressed a desire to step down citing a conflict of interest. His resignation was approved by the board. Mr. Bhargava is a nominee of LIC on the IL&FS board.
LIC is the largest shareholder in IL&FS with 25.34% stake, while Orix Corporation of Japan owns 23.54%. SBI holds 6.42%.
EGM convened
An extra ordinary general meeting has been convened in 15 days to decide on raising funds via a rights issue. IL&FS has yet again defaulted on its commercial paper.
It informed the exchanges that the commercial papers due on September 14, 2018, could not be serviced. The firm had “received notices for delays and defaults in servicing some... Inter Corporate Deposits accepted by it, which resulted in downgrade in credit rating of IL&FS,” it said in a filing.
The present crisis in IL&FS was triggered by defaulting on debt instruments which prompted rating agencies to downgrade some of the instruments. For example, ICRA downgraded IL&FS by several notches to ‘junk grade’. The Reserve Bank of India (RBI) also swung into action following the defaults and downgrade as it ordered an inspection of books. IL&FS, with over 170 subsidiaries, is treated as core investment company, which is under the purview of the banking regulator. The finance arm of the IL&FS is also regulated by RBI. Central banking sources indicate the approach of the regulator to the crisis will be ‘non-disruptive’. “The idea is to avoid any kind of cascading effect since there are there entities that have extended debt to IL&FS,” said a source.
