June 4, 2019 / 4:25 PM / 5 months ago

IL&FS unit confirms investigations by government authorities

A bird flies next to the logo of IL&FS (Infrastructure Leasing and Financial Services Ltd.) installed on the facade of a building at its headquarters in Mumbai, India, September 25, 2018. REUTERS/Francis Mascarenhas

BENGALURU (Reuters) - Infrastructure Leasing & Financial Services Ltd’s (IL&FS) flagship lending unit on Tuesday confirmed for the first time that it is under investigation by various government agencies, months after the group defaulted on some of its debt obligations triggering tremors through Indian financial markets.

IL&FS Financial Services (IFIN) said this in a filing to exchanges, dated May 30, in response to media reports that probes had found discrepancies in loan accounts associated with IL&FS.

The outcome of these investigations is still pending, IFIN said, adding that it had engaged Grant Thornton to conduct a forensic audit.

In March, Reuters reported that an interim report by Grant Thornton had found that a third of the total outstanding loans by IFIN to borrowers were either unsecured or had inadequate collateral.

On May 31, the Economic Times newspaper reported that the Serious Fraud Investigation Office (SFIO) had filed charges against several people and entities associated with IL&FS.

The newspaper also reported that the SFIO accused IL&FS’s auditors and others of concealing information and falsifying accounts.

A spokesman for IL&FS did not respond to a Reuters request for comment on the SFIO charges.

The series of defaults by IL&FS in 2018 led to a slew of credit rating downgrades on the company and its subsidiaries and triggered a massive sell-off in stock and debt markets.

The Indian government took control of IL&FS in October and replaced its board in a bid to insulate the financial system from contagion, as it feared the lender’s collapse would cause “catastrophic” damage to financial markets and the economy.

Reporting by Chandini Monnappa in Bengaluru; Editing by Euan Rocha and Subhranshu Sahu

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