Letter to BS: Public money not for boosting ill-managed financial giants

What will be the contagion impact of the failure of this company on banks, mutual funds and other entities?

This refers to “IL&FS: A perfect storm” (September 19). This is the second default of Infrastructure Leasing & Financial Services (IL&FS) and there is one more inter-corporate deposit coming up for repayment. Now the investments of mutual funds have to be repaid/interest serviced. The debts of company have spiralled from Rs 486 to 910 billion in the last five years, while the operating profit has hovered between Rs 50 to 72 billion. The company is facing a severe financial crisis.

Larger defaults are possible as most of their lendings are tied up in infrastructure financing — roads, bridges, power stations etc