INSUBCONTINENT EXCLUSIVE:
The government on Monday replaced the board of ILFS.New Delhi/Mumbai: Government's move to take control of debt-laden Infrastructure
Leasing and Financial Services (ILFS) will only succeed if lenders agree to take substantial losses, government sources familiar with the
The government on Monday replaced the board of ILFS, a major infrastructure financing and construction firm, after its failure to honour
debt obligations sent shockwaves through Indian financial markets.The beleaguered company's debt pile had grown to more than Rs 90,000
crore ($12.33 billion) as it rode a lending boom among so-called non-bank financial companies (NBFCs), or the shadow banking sector, which
manage an aggregate loan book of nearly $300 billion.But ILFS had compromised on corporate governance and risk management norms, the
government told the company law tribunal on Monday as it explained why it intended to take over the firm.The new six-member ILFS board will
prepare a revival plan, but it is becoming clear some of its lenders will need to suffer major losses, one finance ministry official
said."It may be difficult to save it (ILFS) unless the lenders agree to take substantial haircuts," said the official, who declined to be
identified due to the sensitivity of the matter.The official added that there had been no discussions with the company's lenders, among
them India's largest bank, the State Bank of India, and state-owned lenders, such as Bank of India and Punjab National Bank.A second
government source echoed those views, saying ILFS needed nearly Rs 15,000 crore ($2 billion) in financial support to avert a collapse and
could only be saved if lenders agreed to take a big haircut.The ILFS fallout has already roiled stock markets and the government has
scrambled to contain further damage that could undermine confidence in the financial sector.A credit crunch in financial markets also does
not bode well for Prime Minister Narendra Modi, who is already facing a growing backlash over rising fuel prices, a falling rupee currency
and farmer protests over low crop prices months before he seeks a second term at an election due by next May.The government has said ILFS
was presenting a "rosy picture and camouflaging" its financial statements, but still wants to ensure adequate liquidity for it to avoid
further defaults.One of the government sources, however, cautioned that more defaults cannot be ruled out, as ILFS needs to repay more than
Rs 25,000 crore by March 2019.India's parliamentary panel on finance on Wednesday decided to investigate the ILFS matter and its members
will visit Mumbai this month to meet the new board, a source with direct knowledge of the deliberations said.They will also talk to finance
