Indian rating agencies have blamed the lack of timely default data for their delay in downgrading IL&FS.
How true are their claims?
As early as 2015, IL&FS had disclosed FD under lien of Rs. 161.7 crores in its Cash Flow statement.
This certainly should have been an eye-opener considering the company had disclosed cash of Rs. 6,419 crores in its Balance Sheet.
However, that's not all: it seems the cash disclosed under the Balance Sheet was not freely available to the company. The Cash Flow statement depicts a further bifurcation of this cash balance as balance under margin/ security/ lien and as per the cash flow statement.
Meanwhile the current maturities of long-term borrowings and short-term borrowings increased from Rs. 10,610 crores to Rs. 25,797 crores.
How true are their claims?
As early as 2015, IL&FS had disclosed FD under lien of Rs. 161.7 crores in its Cash Flow statement.
This certainly should have been an eye-opener considering the company had disclosed cash of Rs. 6,419 crores in its Balance Sheet.
However, that's not all: it seems the cash disclosed under the Balance Sheet was not freely available to the company. The Cash Flow statement depicts a further bifurcation of this cash balance as balance under margin/ security/ lien and as per the cash flow statement.
As seen the percent of free cash available to the total cash declined from 87% to 41%.
The percent of free cash to short-term borrowings plunged from 26% in 2014 to 17% in 2018. In other words, to meet a rupee of the short term borrowings only 0.17 rupee was available in 2018 from 0.26 rupee in 2014.
Coupled with the almost 100% increase in the Debt-equity ratio, the situation at IL&FS was screaming disaster and the only ones who couldn't listen were the ones who didn't want to listen.
