Financial Chronicle - - FRONT PAGE - MADHUSUDAN SAHOO

IN a shock­ing rev­e­la­tion, the min­istry of cor­po­rate af­fairs (MCA) has stated that in two years — be­tween FY17 and FY18 — in­fra­struc­ture gi­ant In­fra­struc­ture Leas­ing & Fi­nan­cial Ser­vices (IL&FS) had si­phoned mas­sive funds through loans and ad­vances to its group en­ti­ties.

The min­istry also ob­served that five top ex­ec­u­tives, in­clud­ing chair­man Ravi Parthasarathy, played ma­jor role in the fraud­u­lent ac­tiv­i­ties.

The in­terim re­port of the Se­ri­ous Fraud In­ves­ti­ga­tion Of­fice (SFIO), sub­mit­ted by the min­istry to the Na­tional Com­pany Law Tri­bunal (NCLT) in Mum­bai on De­cem­ber 3, found that non­cur­rent loans given to group com­pa­nies in­creased by 685 per cent from Rs 317.13 crore in FY17 to Rs 2,490.11 crore in FY18. The re­port also re­vealed that the se­cret source of funds for this in­creased loans and ad­vances was short-term loans, raised by the in­fra­struc­ture con­glom­er­ate through com­mer­cial pa­pers, which went up by 302 per cent to Rs 2,007.29 crore in FY18 from Rs 499.25 crore in FY17 and cor­po­rate de­posits that in­creased by 139 per cent to Rs 11,00.35 crore in FY18 from Rs 459.20 crore in FY17. A top min­istry source told FC, “In the SFIO re­port, we have ob­served that IL&FS had many dis­crep­an­cies in loans and ad­vances given the its group en­ti­ties, mostly in FY17 and FY18. The SFIO is in­ves­ti­gat­ing ev­ery in­di­vid­ual in­volved in the fraud­u­lent ac­tiv­i­ties. We will come with de­tailed re­port soon. We ap­pre­hend that some top ex­ec­u­tives of the com­pany played key role in si­phon­ing the funds through loans and ad­vance.”

Dif­fi­cul­ties in get­ting fund­ing will halve the non-bank lenders’ as­set growth to around 10 per cent in the sec­ond half of the cur­rent fi­nan­cial year, a re­port said.

The as­set qual­ity of re­tail loans is re­silient, but the NBFCs’ (non-bank­ing fi­nance com­pa­nies) non-re­tail book has to be mon­i­tored for po­ten­tial stress, do­mes­tic rat­ing agency Crisil said in its re­port on Wed­nes­day.

The re­port comes amid dif­fi­cult times for the NBFCs, which started with the cri­sis at in­fra­struc­ture lender IL&FS, which ex­tended to wor­ries for the en­tire sec­tor. Many were found to have bor­rowed short for long-term as­sets, re­sult­ing in as­set li­a­bil­ity mis­matches that rat­tled in­vestors. The bor­row­ings were from in­vestors such as mu­tual funds, who have turned wary and have in­creased the rates at which they want to lend.

Crisil said while the liq­uid­ity is­sues are eas­ing slowly, dis­burse­ment by NBFCs have gone down by 20-40 per cent, with a more cau­tious ap­proach taken by the non-re­tail seg­ments.

The non-bank­ing fi­nance com­pa­nies, in­clud­ing hous­ing fi­nance com­pa­nies, had notched up a 20 per cent growth in their as­sets un­der man­age­ment for the first half of the fis­cal end­ing Septem­ber, which will slow down to 9-10 per cent in the sec­ond half, ac­cord­ing to the re­port.

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