Parthasarathy, on the other hand, did not get as much blame, despite the fact that Infrastructure Leasing & Financial Services (IL&FS), the non-banking financial company (NBFC) he joined as president and CEO in 1987, would in 2017 become synonymous with financial fraud on a scale rarely seen since.

Promoted by the Central Bank of India along with UTI and HDFC, IL&FS had a promising beginning as a trendsetter of the public-private partnership (PPP) model, with Parthasarathy as its main driver. By then, the IIM Ahmedabad alumnus and former Citibanker had already established his reputation as an entrepreneur, having co-founded 20th Century Finance.

It was one of his many skills. Networking was another. He cleverly roped in senior bureaucrats to head the dozens of special vehicles through which IL&FS executed various projects and of course he hid the real finances.

Parthasarathy had hoped that the government would step in to help, since most of the projects were of national importance. That did not happen. You could call him unlucky, or naive, or just plain reckless and arrogant.

In the early 2000s, the company was the go-to organisation for governments at the centre and in the states. Roads, ports, power, water, environmental infrastructure, nothing was beyond the capabilities of IL&FS. In a delightful bit of irony, when Satyam Computers went under after its own ₹15,000 crore scam, the government turned to IL&FS to bail out Maytas Infra, the real estate group that was at the root of the IT company’s troubles. Parthasarathy, who smelled a deal, bought the company for next to nothing.

Also read: What Satyam, IL&FS and DHFL tell us about insolvency resolution

The deals cemented the Parthasarthy legend and in the years that followed, other heavyweights joined the original investors in IL&FS, including Orix Corporation, Japan and the Abu Dhabi Investment Authority.

Digging a deep hole

But all this was great only for public consumption. Along with the bridges and roads it built, IL&FS also dug a deep hole for itself. The problem was simple. Most of the projects it undertook had a long gestation period.

It takes years to build a toll road and for the toll revenue to start flowing in. But to raise the necessary capital, the company had taken out short-term loans that had to be repaid before the revenue started flowing.

Parthasarathy had hoped that the government would step in to help, since most of the projects were of national importance. That did not happen. You could call him unlucky, or naive, or just plain reckless and arrogant.

When he stepped down as chairman in July 2018 due to failing health, it should have been a warning sign that something was wrong. Subsequent events showed that the debt dam was about to burst and Parthasarathy, always an impeccable timing, had bailed out just before disaster struck. Once the defaults began, the scale of the debt burden became clear. Investigators would later uncover a maze of 348 subsidiaries contributing to a debt mountain of about ₹91,000 crores.

The modus operandi was simple: the parent company raised debt and invested it as equity in each subsidiary. The subsidiaries in turn raised more debt. The credit rating agencies that had given the securities AAA ratings were, as usual, lulled to sleep.

In October 2018, amidst the heightened financial markets and rumours that banks were about to collapse under the weight of unpaid loans, the government replaced the entire board with a new six-member board headed by top banker Uday Kotak. The main task was to unravel the complex matrix in which IL&FS was merely the holding company for dozens of subsidiaries and several joint ventures of companies. Of the total debt, ₹57,000 crore was owed to public sector banks. However, the biggest direct loss from the collapse of IL&FS was suffered by companies like DHFL, which itself also suffered a meltdown.

Parthasarathy was arrested in 2021 by the Enforcement Directorate on charges of embezzlement. During hearings into the case, the Madras High Court said that he along with other plaintiffs were accused of “siphoning off huge sums of money, in the form of salary and perks by holding the post of director and using it, buying huge properties across the world.”

By then, the man was too ill to offer much of a defence. He passed away in April 2022 and in November of the same year, the special Prevention of Money Laundering Act (PMLA) court closed the money laundering case against him.