Rating agencies knew of stress at IL&FS, but gave good ratings: Report

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Jul 22, 2019 06:00 am

MUMBAI/NEW DELHI Credit rating agencies for years assigned high ratings to India's Infrastructure Leasing and Financial Services (IL&FS) and its group companies despite deteriorating finances, a special audit showed.

Audit firm Grant Thornton was appointed by IL&FS's new board to conduct the review. It reviewed the role of five credit rating agencies - Fitch group's India Ratings and Research, the Indian affiliate of Moody's ICRA, Standard & Poor's local unit Crisil, Care Ratings and Brickwork Ratings India - which assigned 429 ratings to IL&FS financial instruments in recent years.

In a report, Grant Thornton said the agencies raised concerns on IL&FS group's financial stress and liquidity position between 2012 and 2018, but continued to assign "consistently high" ratings, which were downgraded or reversed only last year.

"Various strategies deployed by the then key officials of IL&FS group and certain favours/gifts provided to rating agency officials suggest the possible reasons for consistent good ratings provided to IL&FS group," said Grant Thornton in its report that detailed gifts such as smartwatches.

IL&FS declined to comment. India Ratings said the report is based on "partial and selective source material", adding "our ratings were based on robust and transparent analysis of relevant information". - REUTERS