While it is well known that IL&FS is in a pickle of its own making over a 30-year period where a secret society ran the affairs through a closed user group, the latest forensic report by Grant Thornton is extremely damning and damaging. The forensic report handed over to the new IL&FS board uncovers more muck. It throws into stark relief 107 instances of loan ever greening, loans given without adequate collateral, and exposes management's collusive links with borrowers.
Ever greening is a common practice in India: These loans are usually in the form of a line of credit that is continuously paid down, leaving the borrower with available funds for credit purchases.
Slapbang in the middle of the maelstrom is erstwhile managing director of IL&FS Financial Services (IFIN) Ramesh Bawa, now arrested by Serious Fraud Investigation Office (SFIO), who did not divulge 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.
Grant Thornton found indirect links of Bawa with Silverglades Group and Ansal Group, which were given loans amounting to Rs 487 crore. GT found that Silverglades was given loans by the company's ex-director without seeking any collateral. Overall loans worth Rs 3,768 crore were sanctioned without security.
Grant Thornton claimed that it found 107 instances of evergreening of loans worth Rs 10,264 crore. The names of several prominent companies like DB Realty, SKIL, Gayatri Group, Siva, SREI, Kohinoor, Parsvanath and HDIL have been mentioned with regards to the evergreening process.
The report states that 73 instances of negative assessment were found, yet loans to these firms were approved by the company's director. Furthermore, 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.