In the last three fiscals, loans worth Rs 3,871.70 crore were sanctioned by IFIN to window dress its balance-sheet
IL&FS Financial Services Ltd (IFIN) was into evergreening of loans to the extent that it also wrote off bad debt to extend fresh loans. In the last three fiscals, loans worth Rs 3,871.70 crore were sanctioned by IFIN to window dress its balance-sheet.
"It has been found that there have been multiple instances where the borrowers of IFIN, other than group companies, were extended additional credit facility by IFIN so that they could service their outstanding, interest and principal repayment obligations and avoid defaulting and/or classifying the account as NPA (non-performing asset)," reads the 'Interim Report of IL&FS Ltd and its Subsidiaries' by Serious Fraud Investigation Office (SFIO).
The report was submitted by the Ministry of Corporate Affairs (MCA) to the National Company Law Tribunal's (NCLT) Mumbai Bench on Monday.
The multiple instances of ever-greening included loans provided to IL&FS Group companies and to Ind-Bharath Group, Gayatri Group, A2Z Group, Varun Shipping, Housing Development & Infrastructure Ltd, Parsvnath Group, Unitech among others.
For example, during the financial year (FY) 2015-16, the amount classified as 'ever-greening of loans' in the report stood at Rs 1,452.60 crore. It was the exact same amount the subsequent fiscal. However, during the FY2017-18 this figure came down to Rs 966.50 crore.
During FY18, an amount of Rs 280 crore was extended to Flemingo Group's Geowork Infra Projects Private Ltd, while the same Group's different entity – Oscar Infra Private Ltd was sanctioned a loan of Rs 100 crore each during the previous two fiscals of 2015-16 and 2016-17. The total amount sanctioned to the Flemingo Group stood at Rs 480 crore for these three years.
Likewise, KVK Group's MMS Steel & Power Private Ltd and KVK Energy & Infrastructure Private Ltd were sanctioned Rs 25 crore and Rs 133 crore, respectively, during FY2015-16 and FY2016-17. In 2017-18, KVK Energy & Infrastructure Private Ltd got Rs 123.50 crore.
Kohinoor Housing Development Private Ltd was sanctioned loans of Rs 120 crore each in the fiscals of 2015-16 and 2016-17. This firm is promoted by Unmesh Joshi, whose father is former Lok Sabha speaker and ex-chief minister of Maharashtra Manohar Joshi.
There are also instances where an account was written off in the books of IFIN as bad debt and fresh loans were advanced to the company or a group despite the fact that company had written off previous debts of the same borrower group. This is observed in the credit facilities extended to Shiva Group of Companies.
"It is observed that Shiva Group had been a defaulter in its loan commitments from 2011 itself. In November 2017, RBI had also made an observation for making of provisioning for said bad loans. In spite of such history of the borrower, IFIN extended another loan facility of Rs 175 crore to Shiva Shelters & Construction Private Ltd and disbursed an amount of Rs 50 crore in February 2018," the SFIO report highlighted.
As per the report accessed by DNA Money, because of these activities, IFIN was able to inflate its financial performance by ensuring that interest income is generated on the loans that have been regularised through this fresh funding, which otherwise wouldn't have been considered as income in the statement of profit and loss.
Also, fresh interest income was generated through the disbursement of the loans and provisioning for NPA was deflated to display a strong balance-sheet and healthy asset quality on all these loans.
"The ever-greening of the loans resulted in inflated profits, suppressed provisioning and non-disclosure of possible NPAs in the books of IFIN. To this extent the financial statements were misstated to show window dressed view/rosy picture of the financial statements," reads SFIO's interim report.
A final report on the subject is awaited as the SFIO is still investigating into disbursal of the loans, among other things.
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The multiple instances of ever-greening included loans provided to IL&FS Group companies and to Ind-Bharath Group, Gayatri Group, A2Z Group, Varun Shipping, Housing Development & Infrastructure Ltd, Parsvnath Group, Unitech among others.
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