Parthasarathy, against this, hasn’t copped as a lot of the blame even though Infrastructure Leasing & Monetary Providers (IL&FS), the non-banking monetary establishment (NBFC) he had joined as president and CEO in 1987, would by 2017 turn out to be a byword for monetary skulduggery of a scale not often seen earlier than or since.
Promoted by the Central Financial institution of India together with UTI and HDFC, IL&FS had auspicious beginnings as a trendsetter of the public-private partnership (PPP) mannequin, with Parthasarathy as its principal driver. By then, the IIM Ahmedabad alumnus and former Citibanker had already cemented his status as an entrepreneur, having co-founded twentieth Century Finance.
It was one in every of his many abilities. Networking was one other. Shrewdly, he introduced in senior bureaucrats to move the handfuls of particular goal autos via which IL&FS executed varied initiatives and, in fact, hid its actual financials.
Parthasarathy had hoped that since a lot of the initiatives had been of nationwide significance the federal government would step in to assist. It did not. You could possibly rely him unfortunate on that rating or naive or just reckless and conceited.
By the early 2000s, the corporate was the go-to group for governments on the Centre and within the states. Roads, ports, energy, water, environmental infrastructure, nothing was past the scope of IL&FS’s capabilities. In a scrumptious little bit of irony, when Satyam Computer systems collapsed following its personal ₹15,000 crore rip-off, the federal government turned to IL&FS to bail out Maytas Infra, the true property group that was on the root of the IT firm’s woes. Parthasarathy, who might sniff a deal, purchased the corporate for a tune.
Additionally Learn: What Satyam, IL&FS and DHFL inform us about insolvency decision
With the offers including to the Parthasarthy legend, the unique buyers in IL&FS, had been joined in subsequent years by different heavyweights, together with Orix Company, Japan and the Abu Dhabi Funding Authority.
Digging a deep gap
However all of this was nice just for public consumption. Together with the bridges and the roads it was establishing, IL&FS was additionally digging a deep gap for itself. The issue was easy. A lot of the initiatives it undertook had lengthy gestation durations.
A toll street takes years to construct and for toll revenues to start out coming in. However to lift the mandatory capital it had taken quick length loans which got here due properly earlier than its income stream began.
Parthasarathy had hoped that since a lot of the initiatives had been of nationwide significance the federal government would step in to assist. It did not. You could possibly rely him unfortunate on that rating or naive or just reckless and conceited.
When he stop as chairman in July 2018 citing declining well being, it ought to have been a warning that one thing was amiss. Subsequent occasions confirmed that the dam of debt was about to burst and Parthasarathy, who at all times had impeccable timing, had bailed out simply earlier than catastrophe struck. As soon as the defaults began, the extent of indebtedness revealed itself. Investigators would later discover a maze of 348 subsidiaries which contributed to a debt pile of some ₹91,000 crore.
The modus operandi had been easy: the guardian firm raised debt which, it invested as fairness in every subsidiary. The subsidiaries in flip raised additional debt. The credit standing businesses that had assigned AAA rankings to the securities had been, as typical, caught napping.
By October 2018, with the monetary markets on edge and rumours of banks collapsing underneath the load of unpaid loans, the federal government changed all the board with a brand new six-member board led by ace banker Uday Kotak. Its predominant job was to unravel the complicated matrix wherein IL&FS was merely the holding firm for dozens of agency’s a number of subsidiaries and varied joint ventures. Of its whole debt, ₹57,000 crore was owed to public sector banks. Nonetheless, the most important direct injury from the collapse of IL&FS was suffered by firms just like the DHFL, which went via its personal meltdown.
Parthasarathy was arrested by the enforcement directorate in 2021 on prices of embezzlement. In hearings on the case, the Madras excessive court docket mentioned that he together with the opposite petitioners had been accused of siphoning off “enormous sums of cash, within the type of wage and perquisites by holding the submit of Administrators and with assistance from it, had bought very many immovable properties throughout the globe.”
By now, the person was too ailing to supply a lot defence. In April 2022, he handed away, and in November of the identical 12 months, the particular Prevention of Cash Laundering Act (PMLA) court docket closed the cash laundering proceedings towards him.
