A mini IL&FS in the making in Tamil Nadu ?

The arrest   Infrastructure Leasing and Finance Services (IL&FS) Independent Director Ravi Parthasarathy shook the Indian financial markets.   The scam triggered a liquidity crisis in the market.

Tamil Nadu’s Economic Offences Wing in it’s remand report of Ravi Parthasarathy, wrote this. EOW called it a “mammoth scam”, and that the remand was the need of the hour. Seeking remand from the court of the Special Judge under Sections 420, 409, 120B r/w 109 IPC, the EOW termed the case as “…one of the biggest economic frauds in the history of our country. The IL&FS group has defaulted in payments to various creditors through a calculated fraud and the total default caused to the entire creditors is approximately a mind-boggling figure of 1 lakh crore,” the remand note by the EOW added.  Read about the IL & FS scam here.

A similar scam is brewing in an asset management company of the Government of Tamil Nadu.    The Tamil Nadu Infrastructure Fund Management Corporation Ltd (TNIFMC) was set up in 2015 by Govt of TN to raise private capital from Global investors and invest them into infrastructure and affordable housing projects within Tamil Nadu in Government, PPP as well as Private sector. TNIFMC has currently two SEBI approved Alternate Investment Funds (AIF).

The scheme per se is an innovative idea to attract investment.  But due to the mismanagement of this firm by the Board around 40 crores of government funds has gone down the drain.

TNIFMC is handling two funds as of now.

1) Tamil Nadu Infrastructure Fund (TNIF) – To raise USD 1 Billion (Rs 7000 Crs) and invest into infrastructure projects like Roads, Airports, Power, Water, IT Parks etc

2) Tamil Nadu Shelter Fund (TNSF) – To raise USD 500 Million (Rs 3500 Cr) and invest into affordable housing projects.

Ever since its inception, the TNIFMC has completely lost its direction and though not officially declared, this firm has become a sick non performing asset.

TNIFMC is headed by its CEO one Krishnamurthy Vijayan, who is a failed Fund Manager.  Even according to his own admission, he started shut down his own Mutual Fund “14L Fund Management Private Limited”.  In his linkedin profile, Krishnamurthy Vijayan says “Having failed to raise a fund, I closed this in 2015”.  However, Government of Tamil Nadu, thought that Krishnamurthy Vijayan is fit to run TNIFMC for reasons that are not clear.   This failed Fund Manager is being paid a whopping sum of Rs.2 crores as salary apart from other perks.

The selection of Krishnamurthy Vijayan itself is mired in controversy.   Vijayan doesn’t have any exposure to infrastructure or housing projects.

The Chief Secretary of Government of Tamil Nadu is the Chariperson of TNIFMC and Tamil Nadu Finance Secretary is the government nominee.

In the last six years there was no worthwhile investments in TNIFMC and only a fortnight back, TNIFMC has managed to raise 800 crores from Vijayaraja Builders.  For the past six years, ever since it’s inception, TNIFMC has been bleeding and had spent the entire 40 crores of equity raised from shareholders viz. Government of Tamil Nadu, National Housing Bank, Indian Bank and Karur Vysya Bank to form the company.

According to highly placed sources, during a recent review meeting conducted by Finance Minister PTR Thiagarajan, he expressed his displeasure in the functioning of TNIFMC and only as a result of this meeting, TNIFMC in a hurried manner secured investment from Vijayaraja Builders. The original target of Tamil Nadu Infrastructure Fund was Rs.7000 crores.  So far a sum of Rs.450 crores has been raised.  This amount is not due to the hard work of the Board of Directors of TNIFMC but government funds.  TN government has contributed 300 crores and the LIC has poured in Rs.150 crores which it owed to the government.

With regard to Tamil Nadu Shelter Fund, the target was 3500 crores and so far only Rs.400 crores has been raised.   Out of this Rs.250 crores was from the World Bank through Government of Tamil Nadu and Rs.150 crores directly from government.

A source privy to the functioning of TNIFMC had to say this.  “There is a lot of mismanagement going on in TNIFMC without any effective supervision.  TN Finance Secretary S.Krishnan, who is supposed to protect the investment of government and effectively manage TNIFMC is turning a Nelson’s Eye for reasons best known to him.

In the year 2018-19 annual accounts were fudged to show reduced loss compared to the previous financial year.   After submitting the statements for the financial year 2018-19, the amount shown as “fictitious income” was reversed in the next quarter.   Even the alleged funds that were supposed to have come into TNIFMC was raised through a broker with shady background named Kewal Karia”.  This happened in spite of the presence of one K.Srinivasan, who was the COO of TNIFMC on deputation from the office of the Comptroller & Auditor General.   None of the Board Directors including Finance Secretary S.Krishnan bothered to stop this charade.

In July 2018, TN government announced that they have signed an agreement between TNIFMC and Phoenix of Luxemburg for an investment to the tune of Rs. 4000 crores.  Link.       But this investment never came.  This has always been the Modus Operandi of CEO Krishnamurthy Vijayan, whenever he was called upon to show progress on investments.   He would sign an MoU with some investment firm which is never followed through by any one including Finance Secretary Krishnan IAS..

Apart from these lapses, TNIFMC has become a refuge for relatives, friends, and other acquaintances of CEO Krishnamurthy Vijayan say sources.  The selection process for appointments in TNIFMC are so opaque and appointments are made as per the whims of the CEO.  People with shady background are paid humongous salaries without any justification.

One Vijay Gopalan was a former Chief Financial Officer of Air Asia.  He was indicted by the CBI and charge sheeted in the Air Asia scam though he resigned just before CBI stepped in.  Link

One Udday Krishnan has been appointed as President of SPV operations in TNIFMC.  The said Udday Krishnan is a school mate of CEO Krishnamurthy Vijayan and he doesn’t have exposure to infrastructure or housing projects.  He was running a hotel group in the name of Auromatrix Hotels and only his friendship with CEO Krishnamurthy Vijayan had earned him a position in TNIFMC on a whopping salary.

Former School Education Secretary and retired IAS officer Sabitha is appointed as Chief Project Officer at a monthly salary of Rs.1.74 lakhs.

The latest to join this retirement home – TNIFMC is one Chinnuthai Shanmugam, daughter of former Chief Secretary Shanmugam IAS (retired) with a pay package of Rs.22 lakhs per annum.

In the month of December 2020, CEO Krishnamurthy Vijayan brought one Deepak Kunthawala and hosted a banquet in Hyatt Regency.  This Deepak Kunthawala is an NRI based in UK and he is a known fraudster and a declared bankrupt.  Read about Deepak Kunthawala here.

CEO of TNIFMC Krishnamurthy Vijayan when contacted for this piece refused to come on record and said, all details are available in TNIFMC’s website and he is not supposed to talk to the media….

The TNIFMC has so far not brought in any worthwhile investment and has spent almost all the 40 crores of equity money invested by Government of TN & other public sector undertakings including banks only towards salary & perks.

Days are not far when TNIFMC will go bankrupt unless government pumps in more money in this quicksand.

It is time, the government pulls the plug and draw down curtains on this loot.