The investments in these now toxic instruments were primarily made due to the positive and impressive ratings given to commercial papers and NCDs of ILiamp;FS Financial Services (IFIN) on a regular basis. The ratings remained good despite the unhealthy financial condition of the company.
Among the investors of the NCDs of IFIN with investments more than Rs 50 crore were the Postal Life Insurance Fund with the exposure of Rs 315 crore, the highest amount among the 30 names who hold the NCDs.
It was followed by NPS Trust (Rs 229.3 crore), the Postal Life Insurance Fund (Rs 205 crore), and the General Insurance Corporation India (Rs 160 crore).
Other prominent names were The Times of India Provident Fund (Rs 62.7 crore), the Infosys Ltd Provident Fund (Rs 96 crore), and the Hewlett-Packard Global Ltd PF (Rs 60 crore).
The armed forces are also exposed to these investments with the Army Group Insurance Fund investing close to Rs 65 crore in IFIN instruments.
"The investors of the NCDs were mostly the entities managing public funds like banks, insurance companies, pension/provident funds of salaried class employee etc," the report noted.
"As on September 30, 2018, the outstanding NCDs were to the tune of Rs 5,334.75 crore."
The document shows that several investors who subscribed to the ILiamp;FS' financial arm's NCDs and commercial papers, attributed their decision to invest on the high ratings accorded by the rating agencies.
Anurag Jain, Chief Investment Officer at Canara HSBC OBC Life Insurance Company, which invested around Rs 30 crore in commercial papers and around Rs 10 crore in NCDs of IFIN, said their decision to invest was primarily influenced by the credit ratings provided by CARE and ICRA.
"The investment in the ILiamp;FS/IFIN papers was done primarily on the basis of the rating of the companies as provided by the rating agencies CARE and ICRA, which are the highest rated in their categories," the SFIO document quoted Jain as saying.
During the period between 2013 and 2018, the agencies which gave ratings to the financial instruments of IFIN were CARE Ratings, ICRA Ltd, India Ratings iamp; Research and Brickwork Rating India, according to the document.
With an investment of around Rs 115 crore in IFIN's NCDs, the Oriental Insurance Company was also apparently duped by the ratings accorded to IFIN.
"The basis of selection of debt securities are based on the financials, credit ratings and best yields available in the market. IFIN is an NBFC and based on the financial, credit ratings and better yields available, some funds have been allocated periodically based on the constant AAA ratings assigned by two rating agencies, CARE and India Ratings," said Dushyant Kumar Bagoti, DGM at Oriental Insurance Company.