Why the IL&FS crisis is spooking debt and equity markets in India

Pavan Burugula explains why the IL&FS crisis is spooking India's debt and equity markets

What is the genesis of the crisis at IL&FS?

Focused on capital expenditure (capex) rich sectors, Infrastructure Leasing & Financial Services (IL&FS) has used the debt route to raise substantial capital in the past. The current problems started in August when IL&FS defaulted on Rs 4.5 billion worth of inter-corporate deposits (ICDs) to the Small Industries Development Bank of India (SIDBI). Over the next two weeks, the company also delayed payments on commercial papers issued by its subsidiaries. According to official data, the company has Rs 900 billion worth of consolidated debt. The company also has Rs 35 billion worth