The Ministry of Corporate Affairs is likely to recommend a probe by Serious Fraud Investigation Office (SFIO) into allegations of siphoning funds by the beleaguered Dewan Housing Finance Corporation (DHFL) to a host of promoter-led entities.
Government sources said on Tuesday that the Registrar of Companies (Mumbai) submitted its report two days ago, noting serious issues on corporate law violations by the non-banking finance company. “There is good enough evidence for money diversion and fund siphoning,” the sources said.
Last week, a forensic audit conducted by consulting major KPMG confirmed siphoning of funds from DHFL to a host of promoter-led entities.
KPMG was asked to conduct a special review for the period between April 2015 and March 2019 of DHFL’s books to ascertain end-use of loans taken from public sector banks and identify diversion of funds.
In January, web portal Cobrapost accused DHFL promoters of committing financial fraud by creating shell companies. A total of 32 Indian and foreign banks lent Rs 97,000 crore to DHFL Group companies with many borrower companies having the same addresses, directors and auditors, the news portal had alleged.
DHFL is the fourth-largest Indian housing finance company based on loans outstanding as of March. It has been facing a liquidity crisis since September 2018 but has paid over Rs 41,000 crore towards discharging its financial obligations.
The housing finance company has faced multiple rating downgrades in recent months. DHFL says it has been working towards resolving its liquidity crisis in a comprehensive and timely manner.
Last month, DHFL said it defaulted on its financial repayment obligations worth Rs 1,571 crore with regard to the issuance of bonds and commercial papers. The company declared its March quarter results after months of delay on July 13 and reported a loss of Rs 2,223 crore.
But the new disclosures could put the proposed debt restructuring of the non-bank lender in jeopardy. One of the proposals of the draft debt resolution plan envisages conversion of bank loans into a 51 per cent equity stake for the lenders, with the promoters retaining some stake.
If the findings of KPMG forensic audit are proven true, the banks and mutual fund houses may push for a change in management.