India's fifth largest auditor Grant Thornton has submitted its final forensic audit report on IL&FS last week to the new board of the company. In the report, the auditor has found 107 instances of loan evergreening, loans given without proper collateral and management links with borrowers companies.
Moneycontrol has a copy of the forensic audit report.As per the audit report, former managing director of IL&FS Financial Services (IFIN) Ramesh Bawa did not disclose his investments in AAA Infosystem and AAAB Infrastructure, which appears to be potential non-compliance of regulations of the Companies Act. According to the Act, it is mandatory for all company directors to disclose their investments in other firms.
Bawa was arrested by the Serious Fraud Investigation Office (SFIO) in April.
Grant Thornton claimed that it found 107 instances of evergreening of loans worth Rs 10,264 crore. The names of several prominent companies like Essar, DB Realty, SKIL, Gayatri Group, Siva, SREI, Kohinoor, Parsvanath and HDIL have been mentioned with regards to the evergreening process.
Interestingly, most assessments to these companies were negative, yet they were extended loans after approval from the company's director. Some instances mentioned in the audit, state that assessment of ABG International, Gayatri Group, SREI, and Unitech were negative.
The report states that 73 instances of negative assessment were found, yet loans to these firms were approved by the company's director.
On November 1, 2017, the Reserve Bank of India (RBI) had advised IFIN to reduce its exposure to group companies and not provide fresh lending. However, IFIN was found to have violated RBI norms, post the central bank intimation and provided loans to external parties, which in turn transferred the loans to IL&FS group companies primarily IL&FS Transportation Limited.
During the audit, Grant Thornton found that 14 external companies had borrowed money and transferred to IL&FS group companies. SREI borrowed capital thrice and transferred it IL&FS group companies, and Sangam Group borrowed twice and transferred the money to IL&FS.
Further, despite RBI restrictions, IFIN is believed to have purchased shares of ITNL worth of Rs 261 crore, IL&FS Energy Development Company worth of Rs 360 crore and IL&FS Airports worth of Rs 112 crore (overall worth Rs 733 crores).
Moreover, Grant Thornton found 20 instances where loans were given to companies totally worth Rs 1,827 crore without any security from borrowers. It also found 17 instances of loan disbursements worth Rs 1,941 crore, where securities fell short in comparison to the sanctioned amount.
Now, the SFIO is expected to finalise their report and the Enforcement Directorate would take it in cognizance for further action.