Explained! Why LIC is bailing out debt-laden IL&FS

LIC was only seen rescuing debt-ridden public enterprise.

Explained! Why LIC is bailing out debt-laden IL&FS

New Delhi: In what could be seen as the first such case, Life Insurance Corporation of India (LIC), is inching closer  to rescue Infrastructure Leasing & Financial Services (IL&FS), thereby raising several eyebrows.

The public insurer was hitherto only seen rescuing debt-ridden public enterprise. Why is LIC  using policy holders and tax payers' money to bail-out the loss making IL&FS?

Zee Business Input Editor Rajesh Singh and Mumbai Correspondent Brajesh Kumar explain their views.

Q1: Brajesh: Why does IL&FS require a bail out?

IL&FS is facing a double whammy due to net losses and debt. The company has been reporting operating losses for 6 years continuously. Till March 2017, it had a net debt of Rs 60 thousand crore.

IL&FS Transportation Networks has reported a net loss of Rs 248 crore for the first quarter ended June 30. The company had clocked a net profit of Rs 24.78 crore for the corresponding quarter last fiscal. Its total income rose to Rs 1,035.38 crore during the quarter under review as against Rs 997.12 crore in the year-ago period.

Q2: Brajesh: Who are stake holders in IL&FS ?

36 percent foreign companies have stake in IL&FS. Japan-based financial services Group ORIX Corp and Abu Dhabi Investment Authority (ADIA) own 36 percent stake. Private investors hold upto 59.7 percent stake. IL&FS Trust Company Limited owns 12 percent stake.

Q3: Rajesh: Why are questions being raised on LIC stepping up to bail out  IL&?

It is being believed that LIC is misusing taxpayers and policy holders' money. Investors of SBI, Central Bank and HDFC, who are also stake holders in IL&FS, are facing the burnt of the company's debt.