Outlook of a SEBI Registered Investment Advisor

It isn’t possible for a company with such high reputation in the market getting stuck with the crisis and not coming under the lens of credit rating agencies of India. Infrastructure lending giant IL&FS isn’t a novice player in the Indian financial sector, but a well-recognized name on which a considerable amount of investors and debtors of the financial markets rely on. In such a case not keeping a check on its functioning, providing unsecured business loan, and giving a miss to the continuous blunders they were making is suspicious and raises questions on the authenticity of the system.

According to Rachit Chawla, a reputed financial advisor in Delhi, “For a company like IL&FS, a debt of 91 thousand crores is something quite serious and something which has to be checked and rectified at the earliest. But, with no check and rectification measures in hand, the situation started going out of control up to a level that in the month of July, it was found on step-down stage and by August the defaults had started appearing. This clearly indicates that the Audit Team, the Chairman and the Founder could clearly see the crisis coming, but instead stood mum keeping their other team members. Consequently, the entire market is in the dark. Someone should have spoken up, at least have questioned the Chairman’s accountability or subsequent steps should have taken in advance.”

Also, if the statistics and balance sheets of the company in the last three years are closely checked, then it’s clearly visible that their debt burden has jumped 44% which is excessively huge. Now if they are taking emergency loan such aggressively and still getting good credit ratings, then such problems are sure to arrive without any doubts. The situation wouldn’t have been this worse if accessibility to their debts had been stopped in the year 2015 only. 

At that time, they kept on getting money, and they kept on making bad decisions. Besides, they have a lot of debt which they took in the short term whereas the repayment which the state-owned companies have to pay back to them is in the long run. This decision is a complete disaster; if they were taking immediate loan for short-term they should have lent it for short-term basis only, and if they have borrowed for long-term then the lending should also be on a long-term basis. It is out-and-out the repercussion of wrong policies due to which IL&FS got defaulted seven times in 15days, and it is facing a liquidity crunch.