15 lakh salaried employees with PF a/c’s stuck with toxic IL&FS bonds

NEW DELHI: A new threat looms large for the government in an election year. A spanking new but restive community of salaried employees is concerned about its money deposited with the Employees Provident Fund Organisation (EPFO).
At the cutting edge of the ever burgeoning IL&FS crisis, these employees are exposed to toxic investments. Most of these Employee Provident Funds and Employee Pension Funds have stated that the IL&FS resolution plan must provide repayment before secured creditors as the resolution framework proposed by the company doesn’t provide for any payment to secured creditors.
A sense of panic has crept in. They have collectively invested thousands of crores of rupees in IL&FS bonds. Many say that the resolution framework must balance interest of all stakeholders. Others have also challenged Sec 53 of the payment schedule distribution process as it doesn’t address public and social interest. Since these are tradeable instruments, the exact quantum is not known, but investment bankers estimate it to be in thousands of crores since the infrastructure company’s bonds – which were ‘AAA’ rated – were preferred by retirement funds that have a low-risk appetite but still have to get assured returns even when interest rates are low.
The growing discontent is across some of the blue chip Indian corporates. Some of these that have filed an intervening petition with the tribunal, thereby impleading themselves in this gargantuan case on how to run a corporate into the ground, include Apco Infratech, Apco, Titan, Asian Paints PF, Asian Paints Management Cadre Superannuation scheme, Aditya Birla Sun Life MF, Thomas Cook PF, Titan Watches, Hindustan Unilever (HUL), M & M PF, Himami, Bajaj Finance, Hindalco EPF, Max Financial Services PF Trust, IDBI Trusteeship Services Ltd, IndusInd Bank, Hudco Employees CPF, MMTC CPF, 63 Moons, Nayara Energy EPF, Indian Oil Corp, ITPO, CIDCO, SBI PF, GUVNL PF, Ambuja Cement, HDFC AMC, IREDA among others.
The size, scope and magnitude of these companies is self explanatory – HUL, Asian Paints, Hindalco and M & M from the private sector, IOC, SBI and MMTC from the PSU sphere and HDFC AMC and Aditya Birla Sun Life from the mutual fund industry, virtually imperilling India Inc and most importantly dragging the financial savings of lakhs of salaried employees.
The employee provident funds of various companies and other entities had invested in IL&FS bonds and bond holders are unsecured and may or may not get paid in the ongoing crisis at IL&FS. In any case, they are seen pretty much last on the priority list. Over 75 companies and their PFs have filed an intervening petition before the appellate court to seek directions and instructions on repayment to unsecured creditors.