Dear Friends,

The last quarter of the Financial Year 2016-2017, i.e. January – March 2017 has truly been an exceptional one. During this period, the announcement of the Union Budget 2017–18, as well as BJP’s grander victory in the Assembly Polls, has set a clear tone of the Government’s direction for further reforms.

Finance Minister Mr. Arun Jaitley presented the Union Budget 2017-2018 in the Lok Sabha on 1st February 2017 in the backdrop of several momentous global events and the government’s demonetisation initiative. This is the fourth budget by the Narendra Modi government aimed at stimulating economic growth through more domestic consumption, capital spending and infrastructure. Through this Budget, the government has carried on with its Transform-India mission started in 2016, by a continued focus on infrastructure, rural, social welfare, ease-of-doing business, financial sector, fiscal prudence and tax reforms.

Despite demonetisation resulting in reduced consumption and consequently slowdown in the economy, the fiscal deficit was maintained below the targeted level for FY17 at 3.2% and is targeted to be maintained at 3.2% for FY18 and at 3.0% in FY19. This would lend a strong support to India’s credit rating, stability of INR and enable RBI’s accommodative stance on interest rates.

The 2017 budget and performance in 2016-17 clearly show that the government prioritises infrastructure development primarily through construction of national highways, housing and rural infrastructure. The Budget outlays an integrated infrastructure spend of ₹3.96 lakh crores on roads, railways, airports and waterways. It does so because the Railway Budget was subsumed into the main Budget for the first time in over nine decades. Earmarking more funds for infrastructure is welcome, but execution and innovative financing will be critical. The challenge is to bridge a large funding gap, which is expected to be about ₹2 lakh crores after the budgetary support for the coming fiscal. This would require innovative financing solutions. The creases around public private partnerships (PPP) need to be ironed out, and mobilisation of an infrastructure fund needs to be accelerated.

The magnitude of investment in sectors such as housing and transport will incentivise economic activities. The proposal to grant infrastructure status to affordable homes is a welcome move and will attract much needed investments in this space.

As far as the budget announcement for allocation of additional capital of INR 100 billion for Public Sector Banks is concerned, this has disappointed the financial sector at large. It needs to be suitably addressed by the Government of India.

The Budget outlines the government’s intention to focus on the longer-term growth of the economy, remonetisation through accelerated adoption of digital payment mechanisms and ironing out infrastructural bottlenecks. Overall, it is a very well rounded budget which seeks to address requirements of various segments in the economy. Given the general macro-economic environment, domestic and abroad, the budget has achieved the much needed delicate balancing factor.

The Prime Minister Narendra Modi recreated the magic of 2014 General Elections, in the State Assembly Elections this year by largely gaining in most of the States barring Punjab, especially their massive victory in Uttar Pradesh has been unprecedented. The victory in the Assembly Polls will undoubtedly help the Government to have the required numbers in the Upper House (Rajya Sabha), which will obviously set the tone for a much stronger Government and will equip them to move faster on economic reforms.

During this period, at the IL&FS group level, one of the important announcements was the collaboration between IL&FS and Lone Star Funds, a leading US Private Equity Firm to jointly invest in stressed infrastructure projects in India. This collaboration will have an investment capital pool of USD 550 million, which could result in asset purchases of up to USD 2.5 billion. The collaboration’s objectives align closely with the objectives of the Government of India and Reserve Bank of India in resolving stressed infrastructure assets that are causing concern in the banking system. The collaboration seeks to assist Banks, Sponsors and Asset Reconstruction Companies recycle capital, thus permitting reinvestment capital in fresh projects.

We also had a grand celebration of International Women’s Day on 8th March at IFIN. The celebration was very well planned and executed with the effective coordination of Corporate Communications and Human Resources team members. It entailed several events wherein a number of renowned female personalities were invited, who have excelled in their respective fields, to share their experiences, thoughts and philosophies of life.

Last, but not the least, the quarter seems to have ended well at IL&FS Financial Services with the expected achievement of business targets, while adhering to the best corporate governance and perfect compliance, as always.

Sincerely yours,
Ramesh C Bawa
Managing Director & CEO
IL&FS Financial Services Ltd (IFIN)









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