IL&FS board was aware about need for capital infusion three and half year ago, says former independent director Jaithirth Rao

Rao says that IL&FS had approached a Middle East based sovereign wealth fund and also a cash rich Indian group, but both plans didn't work at the end.

FP Staff October 05, 2018 16:13:19 IST
IL&FS board was aware about need for capital infusion three and half year ago, says former independent director Jaithirth Rao

Former independent director of the crisis-ridden Infrastructure Leasing & Financial Services (IL&FS) Jaithirth Rao, in an interview with a newspaper, has said that the company was well aware about the need for capital infusion three and half year ago.

He told Business Standard that the company had approached a Middle East based sovereign wealth fund and also a cash rich Indian group, but both plans didn't work at the end.

The government on Monday seized control of debt-trapped IL&FS, superseding its board with one led by India's richest banker Uday Kotak, and vowed to stop further loan defaults.

"When the government is in control, everybody behaves differently. Creditors are more patient. Debtors, who owe money to the company, will be more forthcoming. They will not contest on payments. And the government will be tough on shareholders," Rao was quoted as saying by the newspaper.

On Wednesday, former independent directors of the crisis-ridden group including Rao wrote to new Chairman Uday Kotak extending their "complete support" in the revival of the entity.

Five former independent directors, including former Chairman SB Mathur, in a letter, also mentioned about IL&FS being unable to raise additional equity despite several attempts and the "asset-liability" mismatch that continued to aggravate.

ILFS board was aware about need for capital infusion three and half year ago says former independent director Jaithirth Rao

Representational image. Image courtesy: IL&FS

While assuring their "complete support", the independent directors said the government's action is the correct one as it enables reaching out to various counter parties, including debtors and creditors of IL&FS, from a position of strength and clarity.

"Despite several attempts during our tenure, IL&FS was unable to raise additional equity directly or at the level of its subsidiaries. It was also unable to complete a merger with a strategic party which failed to consummate in the final stretch," the letter said.

The government on Monday said that having a new board of IL&FS was the necessary first step towards restoring the confidence of the financial market in the IL&FS Group. Defaults by some IL&FS group entities has triggered concerns of liquidity crisis in the financial markets.

As the government made a rare move to replace the board of IL&FS, a private and unlisted company, the turnaround efforts would be steered by Kotak as Non-Executive Chairman.

On Monday, the National Company Law Tribunal (NCLT) cleared the names of six individuals, including that of Kotak, to be appointed as directors on the board of IL&FS as recommended by the government. Kotak would be the Non-Executive Chairman and the five other directors are Vineet Nayyar, G N Bajpai, G C Chaturvedi, Malini Shankar and Nand Kishore.

With inputs from PTI

Updated Date:

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