IL&FS Saga in Two Charts

In recent weeks, the Indian financial markets have been rattled by a technical default at IL&FS, an Indian finance conglomerate, and its subsequent 10-notch rating downgrade by the Indian arm of Moody’s.

A lot of market participants are still hopeful of a rescue of IL&FS by its key shareholders. We present here two charts which may indicate if a potential rescue of this private finance company is a good idea or merely a kicking of the can down the road.

Chart 1: Consolidated Tangible Net Worth of IL&FS (Rs. Billion)

Source: IL&FS Website. DPA adjustments

The consolidated tangible net worth of IL&FS moved from negative Rs. 100 billion in March 2014 to negative Rs. 250 billion in March 2018.

Chart 2: Consolidated Financial Borrowings of IL&FS (Rs. Billion)

Source: IL&FS Website. DPA Adjustments

The consolidated financial borrowings of IL&FS increased from Rs. 500 billion in March 2014 to Rs. 900 billion in March 2018.

Negative and falling tangible net worth on one hand and rising borrowing on the other hand indicates the state of financial health of IL&FS group. Readers can draw their own conclusions based on these two charts if the troubles of IL&FS are merely liquidity mismatches or they indicate solvency crisis.

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