The audit report by Grant Thornton India on debt-ridden infrastructure financier, Infrastructure Leasing & Financial Services (IL&FS), has highlighted severe irregularities such as conflicts of interest, inadequate risk assessment and deviation from banking norms. As per the interim audit report submitted to the board of the beleaguered IL&FS, transactions of more than Rs 13,000 crore could be directly linked to rampant irregularities.
The report underlined that in at least 29 instances, loan proceeds to borrowers was eventually utilised by the group companies to repay existing debt obligations with IL&FS Financial Services Limited (IFIN).
In the financial year 2016, SKIL Infrastructure's Gujarat-Dwarka Portwest Ltd took a loan of Rs 253 crore and during the same period, SKIL Infrastructure repaid Rs 230 crore to IFIN. Similarly, between 2017 and 2019, Rs 365 crore was disbursed by IFIN to Flemingo Group at the same time, its group companies repaid Rs 407 crore to IFIN.
Moreover, in the last fiscal, India Cements' Chennai Super Kings Ltd borrowed Rs 65 crore from IFIN and, at the same time EWS Finance & Investment Pvt Ltd paid Rs 40 crore to IFIN, the report said. The draft report scrutinized all high-value transactions carried out by IL&FS Limited and few of its group companies for the period between April 1, 2013, and September 30, 2018.
Over Rs. 6,000 crore is linked to the transaction at IL&FS Financial Service Ltd (IFIN) that violated banking governance norms laid by the Reserve bank of India (RBI). Around Rs 2,270 crore, proceeds to borrowers of IFIN was utilised by certain IL&FS group companies out of which Rs 1,150 crore was injected into IL&FS Transportation Network Ltd (ITNL). Notably, the crisis broke out in July 2018 when the road arms started facing difficulty in making repayments due on its bonds.
The audit report showed that there were many instances where funds worth Rs. 541 crore were taken for short-term purposes and utilised for long-term purposes. "We reviewed the Asset Liability Management Committee (ALCO) minutes and noted the details of funding gaps (i.e. funds not available for estimated committed disbursement). Based on the details, it appears that since May 2013, IFIN was under stress to borrow funds in order to fulfil the commitment of loans already sanctioned," the report mentioned.