From Maytas to Gift: The saga of IL&FS deals
MUMBAI: When Maytas Infra promoted by the family members of Satyam Computers was taken over by Infrastructure Leasing & Financial Services (IL&FS), the situation was entirely different.
IL&FS was looked upon as a strong promoter entering to save the company and its many infrastructure projects with its expertise and cash. Be it winning Maytas, or landing a dream project like Gujarat’s Gift City, critics attribute it to the brand and power its former head Ravi Parthasarathy wielded.
Renamed IL&FS Engineering and Construction, Maytas Infra is one of the few listed entities from IL&FS fold. The listed entity has been swinging from profits to losses and till date carries a heavy interest burden. Did IL&FS stretch itself beyond means in many ways like the Maytas deal?
“What happened 10-years ago has no relevance today. They bought an asset that was valuable,” says Nilesh Shah, MD, Kotak Mahindra Mutual Fund. “When times turn even the mightiest fall,” Shah added quoting the example of GE’s collapse in 2008 and eventual turnaround.
“Satyam (Maytas deal) is part of the saga. Toxicity of IL&FS had started by then,” said an old colleague of Ravi Parthasarathy.
Like Satyam, IL&FS needs quick action from the new board. Unlike Satyam, IL&FS is not being sold and the way the new board will come up with solutions to manage the unwieldly company would be watched. The main promoters here are public sector institutions, they will stay unless some of them look for an exit.
“If needed, the debt can be restructured, a moratorium sought, or restructured by banks taking a hair cut,” Shah said.
IL&FS management was accused of being filled with finance people at the top with little technological, project management capabilities. Criticism has come on about the newly appointed board as well. “IL&FS saga, how much depth new board has in infrastructure? None,” tweeted B.K.Syngal, ex-CMD, VSNL.
“Culprits for time and cost overruns must be apprehended. What about auditors and old board? No car boot sale,” Syngal said. “Douse the fire first, and then identify those responsible for fire,” said Shah.
The controversial Gift City project where IL&FS is a 50:50 partner, critics allege the contract is loaded in favour of IL&FS and that the company is not losing, but making money at the cost of state exchequer.
“Their equity exposure in the project is small. The two buildings they had constructed also, they have been able to sell at profits as far as we know,” said a person associated with Gift city.