oppn parties IL&FS: How Will Uday Kotak Clear The Mess?

News Snippets

  • Trouble brews in Bihar JD(U)-BJP alliance as Bihar police asks special branch officers to keep tabs on RSS activities
  • Trust vote in Karnataka assembly today. With rebel MLAs deciding to stay away after the SC order, the Congress-JD(S) government is likely to fall as it does not have the numbers
  • Amit Shah says the government will identify and deport illegal immigrants from all parts of the country
  • Reports from Pakistan confirm that Hafiz Saeed has been arrested and sent to jail
  • After the SC order, Karnataka Speaker says he will go by the Constitution in deciding on the resignations of the 16 MLAs
  • Rebel MLAs say they will not attend the trust vote on Thursday
  • Supreme Court rules that rebel MLAs cannot be forced to attend the assembly and vote in the floor test
  • Both the Centre and the Assam government have sought re-verification of up to 20% of draft NRC data
  • Pakistan opens its airspace for Indian planes
  • Dilapidated building collapses in Mumbai, killing more than 10 people while many were still trapped
  • Kulbhushan Jadhav case verdict to be delivered today by the ICJ
  • A Vistara flight landed in Lucknow with just 5 to 10 minutes of fuel left in the tank
  • Supreme Court to decide on Karnataka MLAs plea today
  • Karnataka alliance to face floor test on Thursday
  • China says that the next Dalai Lama will be appointed by it
International Court of Justice agrees with India, stays Kulbhushan Jadhav's execution. It asks Pakistan to allow consular access to the accused.
oppn parties
IL&FS: How Will Uday Kotak Clear The Mess?

By Ashwini Agarwal

The government has done well to supersede the board of the troubled IL&FS Ltd. and appoint a six-member board under the chairmanship of Uday Kotak to try and clear the mess the company finds itself in. The IL&FS fiasco had the potential to snowball into a major payments crisis that could have shattered the Indian financial system, bringing down mutual funds, stock markets, insurance companies, banks and NBFCs. On paper, the group has, through a maze of subsidiaries, more assets than liabilities. But none of its assets are likely to fetch the market price in these troubled times, making a bail-out necessary.

Although brewing for a few months, the crisis finally erupted when on September 14, the company defaulted in payments of bank loans and interest, deposits and commercial paper obligations. Subsequently, it also failed to pay back inter-corporate deposits, leading to a ratings downgrade. It created panic in the financial markets.

The first task that the new board faces is to unravel the links of the maze of companies that the group controls. It also has to take stock of the assets on the books, some of which like the ones in the energy and transport sectors are almost duds, and evaluate them. Then, it will have to prepare a roadmap of how the issue will be resolved. The markets will have to prepare themselves for a long haul as all this cannot be done in a hurry.