The new board of Infrastructure Leasing & Financial Services (IL&FS) was appointed by the Centre on October 1, after it secured the approval of the National Company Law Tribunal (NCLT) to supersede the previous board accused of ‘mismanagement’ and ‘compromise of corporate governance norms,’ leading to financial issues.
Who comprises the Board?
The stewardship of the new board, entrusted with rescuing IL&FS from its own overreach, has been handed to ace banker Uday Kotak, executive vice-chairman & managing director of Kotak Mahindra Bank. Mr. Kotak will join hands with Vineet Nayyar, who has been named vice-chairman & managing director and who had played a role in the rescue of Satyam Computer Services after its founder Ramalinga Raju admitted to a massive accounting fraud. The board also includes former banking secretary G.C. Chaturvedi and former SEBI chairman G.N. Bajpai, who had also served as chairman of Life Insurance Corporation of India after a life-long career in the insurance monolith, which is also the largest shareholder in IL&FS. Nand Kishore and Dr. Malini Shankar have been roped in as the other directors, while C.S. Rajan’s name was added on October 3 after seeking fresh approval from the NCLT.
Why is a banker at the helm?
Mr. Kotak, 59, Asia’s richest banker, is a credible face and has headed several committees for the government, including a 21-member SEBI committee on corporate governance. Mr. Nayyar is a retired IAS officer credited with handling the Satyam Computers scam in 2009 and overseeing its transition and turning it around when it was bought by the Mahindra Group. He will be involved in running the company and its subsidiaries on a day-to-day basis. The 79-year-old is known for building teams of high performers and running successful businesses.
Who will look after shareholders?
Mr. Bajpai is on the board of several companies and has been appointed as the head of the Shareholders’ Relationship Committee at IL&FS. His responsibility will be to unite the shareholders in the bid for the reconstruction and, more importantly, the recapitalisation of the company. The shareholders include LIC, ORIX Corporation, the Central Bank of India, Abu Dhabi Investment Authority, HDFC and the State Bank of India. That the company’s current woes partly arise from the shareholders’ inability to agree on the right valuation for bringing in fresh capital suggests that Mr. Bajpai has an unenviable task on hand. Mr. Chaturvedi, a former IAS officer, will head the nomination and remuneration Committee to look into the wages of employees as the former directors and top officials were accused of drawing high wages even when the company was not doing well.
Dr. Shankar, an IAS officer now posted as Director-General of Shipping, has been appointed as the chairperson of the corporate social responsibility committee of IL&FS. Mr. Kishore, a retired Indian Audit & Accounts Service officer of the 1981 batch, has been appointed as chairman of the audit committee. He will handle a crucial job as he has to untangle the financial knots and asset-liability mismatches that have brought the company to its current fate. He was formerly the deputy Comptroller and Auditor-General of India. Mr. Rajan is a retired IAS officer and had previously served as the Chief Secretary of Rajasthan. He has been made a member of the crucial audit and nomination & remuneration committees.
What is in store?
The seven-member board held its first meeting in Mumbai on October 4 to take stock of the imbroglio, accepting the responsibility as a “national duty.” It will be a challenge to restructure the defaulting company and reassure financial markets, especially lenders and bond-holders rattled by missed payments.