IL&FS BOSSES USED LOANS & ADVANCES TO BLEED COMPANY WHITE
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.