FILE PHOTO: People walk past a building of IL&FS (Infrastructure Leasing and Financial Services Ltd.) outside its headquarters in Mumbai, India, September 25, 2018. REUTERS/Francis Mascarenhas/File Photo
Outside the headquarters of IL&FS in Mumbai, India. The Indian government took action this week after a string of defaults by the company. Reuters

Inside Modi's stunning takeover of one of India's riskiest lenders



With the future stability of the Indian financial system on the line, executives running a giant infrastructure lender gathered at the company’s glassy, modernist headquarters in Mumbai and hammered out an ambitious restructuring plan last Saturday to manage a $12.6 billion (Dh46.2bn) debt burden after a string of defaults.

Except that they weren’t really calling the shots any more. The very next day, the government in New Delhi authorised a move to sweep in and seize control of Infrastructure Leasing & Financial Services (IL&FS), a vast conglomerate that’s raised billions of dollars in the corporate bond market and powered the nation’s public project building boom.

The stunning move, more typical of China’s command-and-control economy than a free-wheeling democracy like India, caught investors by surprise. Prime Minister Narendra Modi’s government also unveiled an investigation into IL&FS’s management by the Serious Fraud Investigation Office.

The decision to oust the company’s board was taken by Finance Minister Arun Jaitley after the government had quietly reached out, at least two days earlier, to former bureaucrats and current bankers to orchestrate a board coup, according to people familiar with the matter. The government had been monitoring the lender for two weeks, one of the people said.

Following a series of meetings last week, and months after the first defaults by the systemically important lender, the ministry was worried about the multiple shocks to the financial markets that would follow from IL&FS’s collapse.

“The restoration of confidence of the money, debt and capital markets, the banks and financial institutions in the credibility and financial solvency of the IL&FS Group is of utmost importance for the financial stability of capital and financial markets,” the government said in a statement Monday.

In addition to handpicking a new board of directors, the government is expected to overhaul the management and monitor any future restructuring plan, a process that seems likely to extend well into 2019. The newly constituted board led by Asia’s richest banker, Uday Kotak, is likely to meet Thursday. It must devise a plan for the group and file a response to the National Company Law Tribunal, which endorsed the government’s move, by October 15. The tribunal will next hear the matter on October 31.

Mr Modi’s government concluded it had few options. The economy was already grappling with surging fuel prices and a plunging currency. The last thing the government needed was more turmoil in the debt market, with plans underway to raise a net 2.47 trillion rupees ($34.7bn) through March to bridge India’s fiscal gap.

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Another consideration, and a big one, is that Mr Modi’s Bharatiya Janata Party faces a general election in early 2019. During his four years in power, Mr Modi has tried to cultivate a pro-poor image. That will be tested as the opposition questions IL&FS’s loan-fueled expansion.

“The government was left with no choice but had to act quickly and decisively,” said Mathew Antony, managing partner of Aditya Consulting, an advisory firm based in Mumbai. “The risk from IL&FS’s default was spreading to all corners of the market and any indecisiveness would have eroded the political capital of the government further.”

The troubles at IL&FS had been intensifying since July, when company founder Ravi Parthasarathy stepped down, citing health reasons. Defaults from August within the group rattled India’s money markets, added to pressure on corporate bond yields and sparked a sell-off in the stock market.

The Reserve Bank of India has initiated a special audit, given the potential systemic risk to other non-bank lenders. There were also worries about upcoming group debt payments.

Over the past week, Mr Jaitley, the Finance Minister, had come under pressure to act after receiving formal letters, including one from opposition lawmaker K.V. Thomas, raising concerns about operations at IL&FS, according to people familiar with the matter. Mr Jaitley’s team on Sunday sent a confidential note to the Ministry of Corporate Affairs recommending that the company court be approached for the “reconstitution” of the IL&FS board.

In the secret memo, the finance ministry said it was concerned that just 28 billion rupees (Dh1.3bn) of IL&FS securities owned by mutual funds could set off a chain reaction of redemptions by investors. That, in turn, may send sovereign bond yields soaring to 8.5 per cent, a level not seen since 2014, and possibly derail the government’s borrowing plan, according to the note seen by Bloomberg. Finance ministry spokesman D.S. Malik declined to comment.

On Monday, government lawyers sought the National Company Law Tribunal’s approval to oust the board calling the directors a “parasite on public fund,” because of their “hefty” salary packages. Former Managing Director and Vice Chairman Hari Sankaran was paid 77.6 million rupees in the year ended March 31, while founder chief executive Parthasarathy took home 205m rupees, according to the company’s annual report.

The IL&FS Group is a bewilderingly complex conglomerate, with 169 direct and indirect subsidiaries. To defuse the long-running crisis at the company, the financier had considered selling short-term bonds, recapitalising the company, and selling or stalling existing infrastructure projects, according to an ousted director, who asked not to be identified because the person isn’t authorised to talk to the media.

Another option was a bailout orchestrated by its biggest investors, which include Life Insurance, India’s largest life insurer; State Bank of India, its largest bank; and Housing Development Finance, its largest mortgage lender. Japan’s Orix is the company’s second-largest shareholder.

A plan to raise funds by selling stake to Piramal Enterprises, controlled by billionaire Ajay Piramal, in 2015, was rejected by the shareholders. That prompted the firm, which lent for projects that take years to complete, to seek short-term funds, according to the director.

Enter the Reserve Bank of India. The nation’s central bank in an attempt to clean-up a burgeoning pile of stressed debt issued stringent new rules barring fresh loans to borrowers with dud debt. That made it difficult for struggling companies to get new loans from banks.

Five special purpose vehicles of IL&FS Transportation Networks Ltd. failed to service obligations in June, followed by defaults by parent IL&FS and its units on commitments including bonds and commercial papers starting August. A state lender Small Industries Development Bank of India filed an insolvency petition against IL&FS and its unit last month over missed payments.

The government in its court filing said IL&FS was “indiscriminately” borrowing money. IL&FS “has been presenting a rosy picture and camouflaging its financial statements by hiding severe mismatch between its cash flows and payment obligations, total lack of liquidity and glaring adverse financial ratios,” according to the 44-page filing.

The events that led to the firing of the board started with a complaint against a unit written to the Ministry of Corporate Affairs office in Mumbai a few weeks ago. That was followed by lawmaker Mr Thomas’s letter to Mr Jaitley on September 20 in which he asked the minister to help IL&FS to avoid the world’s fastest growing major economy from plunging “into a recession”.

Shares of the the group’s listed units have been surging since the ousting of the board. IL&FS Investment Managers surged 10 per cent on Wednesday, while IL&FS Transportation Networks advanced 19 per cent.

“Investors didn’t want to put more money without a strong leadership and we can’t imagine a better team than the newly constituted board,” said Gaurang Shah, chief investment strategist at Geojit Financial Services in Mumbai. “Assurance by the government and the necessary action taken against the erstwhile board has brought the much needed confidence.”

How Alia's experiment will help humans get to Mars

Alia’s winning experiment examined how genes might change under the stresses caused by being in space, such as cosmic radiation and microgravity.

Her samples were placed in a machine on board the International Space Station. called a miniPCR thermal cycler, which can copy DNA multiple times.

After the samples were examined on return to Earth, scientists were able to successfully detect changes caused by being in space in the way DNA transmits instructions through proteins and other molecules in living organisms.

Although Alia’s samples were taken from nematode worms, the results have much bigger long term applications, especially for human space flight and long term missions, such as to Mars.

It also means that the first DNA experiments using human genomes can now be carried out on the ISS.

 

Top 10 most competitive economies

1. Singapore
2. Switzerland
3. Denmark
4. Ireland
5. Hong Kong
6. Sweden
7. UAE
8. Taiwan
9. Netherlands
10. Norway

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Directors: Scott Beck, Bryan Woods

Stars: Adam Driver, Ariana Greenblatt, Chloe Coleman

Rating: 2/5

Dr Graham's three goals

Short term

Establish logistics and systems needed to globally deploy vaccines


Intermediate term

Build biomedical workforces in low- and middle-income nations


Long term

A prototype pathogen approach for pandemic preparedness  

Living in...

This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

ROUTE TO TITLE

Round 1: Beat Leolia Jeanjean 6-1, 6-2
Round 2: Beat Naomi Osaka 7-6, 1-6, 7-5
Round 3: Beat Marie Bouzkova 6-4, 6-2
Round 4: Beat Anastasia Potapova 6-0, 6-0
Quarter-final: Beat Marketa Vondrousova 6-0, 6-2
Semi-final: Beat Coco Gauff 6-2, 6-4
Final: Beat Jasmine Paolini 6-2, 6-2

Thor: Love and Thunder

Director: Taika Waititi 

Stars: Chris Hemsworth, Natalie Portman, Christian Bale, Russell Crowe, Tessa Thompson, Taika Waititi

Rating: 4/5

How to report a beggar

Abu Dhabi – Call 999 or 8002626 (Aman Service)

Dubai – Call 800243

Sharjah – Call 065632222

Ras Al Khaimah - Call 072053372

Ajman – Call 067401616

Umm Al Quwain – Call 999

Fujairah - Call 092051100 or 092224411

The years Ramadan fell in May

1987

1954

1921

1888

The Specs

Engine: 1.6-litre 4-cylinder petrol
Power: 118hp
Torque: 149Nm
Transmission: Six-speed automatic
Price: From Dh61,500
On sale: Now

Specs

Price, base: Dhs850,000
Engine: 3.9-litre twin-turbo V8
Transmission: Seven-speed automatic
Power: 591bhp @ 7,500rpm
Torque: 760Nm @ 3,000rpm
Fuel economy, combined: 11.3L / 100km

The specs

Engine: 1.5-litre 4-cylinder
Transmission: CVT
Power: 119bhp
Torque: 145Nm
Price: Dh,89,900 ($24,230)
On sale: now

Dengue fever symptoms
  • High fever
  • Intense pain behind your eyes
  • Severe headache
  • Muscle and joint pains
  • Nausea
  • Vomiting
  • Swollen glands
  • Rash

If symptoms occur, they usually last for two-seven days

LIVERPOOL TOP SCORERS

(Premier League only)
Mohamed Salah 129
Robbie Fowler 128
Steven Gerrard 120
Michael Owen 118
Sadio Mane 90

SPEC SHEET: APPLE IPHONE 15 PRO MAX

Display: 6.7" Super Retina XDR OLED, 2796 x 1290, 460ppi, 120Hz, 2000 nits max, HDR, True Tone, P3, always-on

Processor: A17 Pro, 6-core CPU, 6-core GPU, 16-core Neural Engine

Memory: 8GB

Capacity: 256/512GB / 1TB

Platform: iOS 17

Main camera: Triple: 48MP main (f/1.78) + 12MP ultra-wide (f/2.2) + 12MP 5x telephoto (f/2.8); 5x optical zoom in, 2x optical zoom out; 10x optical zoom range, digital zoom up to 25x; Photonic Engine, Deep Fusion, Smart HDR 4, Portrait Lighting

Main camera video: 4K @ 24/25/30/60fps, full-HD @ 25/30/60fps, HD @ 30fps, slo-mo @ 120/240fps, ProRes (4K) @ 60fps; night, time lapse, cinematic, action modes; Dolby Vision, 4K HDR

Front camera: 12MP TrueDepth (f/1.9), Photonic Engine, Deep Fusion, Smart HDR 4, Portrait Lighting; Animoji, Memoji

Front camera video: 4K @ 24/25/30/60fps, full-HD @ 25/30/60fps, slo-mo @ 120/240fps, ProRes (4K) @ 30fps; night, time lapse, cinematic, action modes; Dolby Vision, 4K HDR

Battery: 4441mAh, up to 29h video, 25h streaming video, 95h audio; fast charge to 50% in 30min (with at least 20W adaptor); MagSafe, Qi wireless charging

Connectivity: Wi-Fi, Bluetooth 5.3, NFC (Apple Pay), second-generation Ultra Wideband chip

Biometrics: Face ID

I/O: USB-C

Durability: IP68, water-resistant up to 6m up to 30min; dust/splash-resistant

Cards: Dual eSIM / eSIM + eSIM (US models use eSIMs only)

Colours: Black titanium, blue titanium, natural titanium, white titanium

In the box: iPhone 15 Pro Max, USB-C-to-USB-C woven cable, one Apple sticker

Price: Dh5,099 / Dh5,949 / Dh6,799

Teams

Punjabi Legends Owners: Inzamam-ul-Haq and Intizar-ul-Haq; Key player: Misbah-ul-Haq

Pakhtoons Owners: Habib Khan and Tajuddin Khan; Key player: Shahid Afridi

Maratha Arabians Owners: Sohail Khan, Ali Tumbi, Parvez Khan; Key player: Virender Sehwag

Bangla Tigers Owners: Shirajuddin Alam, Yasin Choudhary, Neelesh Bhatnager, Anis and Rizwan Sajan; Key player: TBC

Colombo Lions Owners: Sri Lanka Cricket; Key player: TBC

Kerala Kings Owners: Hussain Adam Ali and Shafi Ul Mulk; Key player: Eoin Morgan

Venue Sharjah Cricket Stadium

Format 10 overs per side, matches last for 90 minutes

Timeline October 25: Around 120 players to be entered into a draft, to be held in Dubai; December 21: Matches start; December 24: Finals

Specs: 2024 McLaren Artura Spider

Engine: 3.0-litre twin-turbo V6 and electric motor
Max power: 700hp at 7,500rpm
Max torque: 720Nm at 2,250rpm
Transmission: Eight-speed dual-clutch auto
0-100km/h: 3.0sec
Top speed: 330kph
Price: From Dh1.14 million ($311,000)
On sale: Now

COMPANY PROFILE

Name: SmartCrowd
Started: 2018
Founder: Siddiq Farid and Musfique Ahmed
Based: Dubai
Sector: FinTech / PropTech
Initial investment: $650,000
Current number of staff: 35
Investment stage: Series A
Investors: Various institutional investors and notable angel investors (500 MENA, Shurooq, Mada, Seedstar, Tricap)

Ramez Gab Min El Akher

Creator: Ramez Galal

Starring: Ramez Galal

Streaming on: MBC Shahid

Rating: 2.5/5

A Round of Applause

Director: Berkun Oya
Starring: Aslihan Gürbüz, Fatih Artman, Cihat Suvarioglu
Rating: 4/5

If you go...

Fly from Dubai or Abu Dhabi to Chiang Mai in Thailand, via Bangkok, before taking a five-hour bus ride across the Laos border to Huay Xai. The land border crossing at Huay Xai is a well-trodden route, meaning entry is swift, though travellers should be aware of visa requirements for both countries.

Flights from Dubai start at Dh4,000 return with Emirates, while Etihad flights from Abu Dhabi start at Dh2,000. Local buses can be booked in Chiang Mai from around Dh50

The specs

Engine: 2.0-litre 4-cyl turbo

Power: 201hp at 5,200rpm

Torque: 320Nm at 1,750-4,000rpm

Transmission: 6-speed auto

Fuel consumption: 8.7L/100km

Price: Dh133,900

On sale: now

Company Profile

Name: HyveGeo
Started: 2023
Founders: Abdulaziz bin Redha, Dr Samsurin Welch, Eva Morales and Dr Harjit Singh
Based: Cambridge and Dubai
Number of employees: 8
Industry: Sustainability & Environment
Funding: $200,000 plus undisclosed grant
Investors: Venture capital and government

Explainer: Tanween Design Programme

Non-profit arts studio Tashkeel launched this annual initiative with the intention of supporting budding designers in the UAE. This year, three talents were chosen from hundreds of applicants to be a part of the sixth creative development programme. These are architect Abdulla Al Mulla, interior designer Lana El Samman and graphic designer Yara Habib.

The trio have been guided by experts from the industry over the course of nine months, as they developed their own products that merge their unique styles with traditional elements of Emirati design. This includes laboratory sessions, experimental and collaborative practice, investigation of new business models and evaluation.

It is led by British contemporary design project specialist Helen Voce and mentor Kevin Badni, and offers participants access to experts from across the world, including the likes of UK designer Gareth Neal and multidisciplinary designer and entrepreneur, Sheikh Salem Al Qassimi.

The final pieces are being revealed in a worldwide limited-edition release on the first day of Downtown Designs at Dubai Design Week 2019. Tashkeel will be at stand E31 at the exhibition.

Lisa Ball-Lechgar, deputy director of Tashkeel, said: “The diversity and calibre of the applicants this year … is reflective of the dynamic change that the UAE art and design industry is witnessing, with young creators resolute in making their bold design ideas a reality.”

A Prayer Before Dawn

Director: Jean-Stephane Sauvaire

Starring: Joe Cole, Somluck Kamsing, Panya Yimmumphai

Three stars

TECH SPECS: APPLE WATCH SERIES 8

Display: 41mm, 352 x 430; 45mm, 396 x 484; Retina LTPO OLED, up to 1000 nits, always-on; Ion-X glass

Processor: Apple S8, W3 wireless, U1 ultra-wideband

Capacity: 32GB

Memory: 1GB

Platform: watchOS 9

Health metrics: 3rd-gen heart rate sensor, temperature sensing, ECG, blood oxygen, workouts, fall/crash detection; emergency SOS, international emergency calling

Connectivity: GPS/GPS + cellular; Wi-Fi, LTE, Bluetooth 5.3, NFC (Apple Pay)

Durability: IP6X, water resistant up to 50m, dust resistant

Battery: 308mAh Li-ion, up to 18h, wireless charging

Cards: eSIM

Finishes: Aluminium – midnight, Product Red, silver, starlight; stainless steel – gold, graphite, silver

In the box: Watch Series 8, magnetic-to-USB-C charging cable, band/loop

Price: Starts at Dh1,599 (41mm) / Dh1,999 (45mm)

COMPANY PROFILE

Name: Xpanceo

Started: 2018

Founders: Roman Axelrod, Valentyn Volkov

Based: Dubai, UAE

Industry: Smart contact lenses, augmented/virtual reality

Funding: $40 million

Investor: Opportunity Venture (Asia)


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