Reliance Home Finance says no adverse findings in forensic audit report

New Delhi, Jan 12 (SocialNews.XYZ) An independent forensic audit in Reliance Home Finance Limited (RHFL) contains no adverse findings on any fraud, embezzlement, diversion or siphoning of funds by the company, or its promoters.

The forensic audit conducted by Grant Thornton was mandated by the lenders of RHFL which has been completed.

The forensic audit is part of the debt resolution process, as per RBI guidelines on prudential framework.

In a statement, RHF said there are no adverse findings on the forensic audit on any fraud, embezzlement, diversion and siphoning of funds or falsification of accounts by any of the company or its promoters, employees or associates.

The comprehensive scope of the forensic audit included diversion and siphoning of funds, embezzlement, malafide operations among others.

RHFL said even prior to the commencement of the forensic audit, had transparently disclosed full details of lending to potential indirectly linked entities to auditors, regulator, lenders and also in the latest annual financial statements, duly approved by the shareholders at the AGM in September 2019.

"This media release is being issued to protect the interests of all stakeholders and address any misinformation arising out of mischievous selective leakage of the forensic audit report by vested interests in an attempt to derail the Company's debt resolution plans," RHFL said.

The company said the lending to potential group companies was entirely for the end-use of debt servicing by the listed group companies only.

There are no adverse findings in the forensic audit relating to the quantum and end-use of the lending to potential indirectly linked entities.

The observations in the forensic audit are limited to potential regulatory anomalies which had already been reported to NHB, for which NHB has already taken action by requisite penalty and directions.

RHFL has requested lenders to fast-track the debt resolution plan already submitted under "change of control and management" as per the RBI circular to maximize realization in the overall best interest of all lenders.

As part of the Debt Resolution process, the Company's lenders appointed Grant Thornton in August 2019 for forensic audit, as required under RBI guidelines on Prudential Framework for Resolution of Stressed Assets under change of control and management.

The company's auditors in the Company's Annual Report dated August 13, 2019 for FY 18-19 (page no. 54) prior to the commencement of Forensic Audit have already likewise confirmed the following: "During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us by the management, we have neither come across any instance of fraud by the Company, or any fraud on the Company by its officers or employees, noticed or reported during the year, nor have we been informed of any such instance by the management except a case of fraud on the Company for commercial purchase loan for an identified property amounting to (only) Rs. 2.04 Crore which was identified by management ..."

The forensic report has confirmed the potential group entities' exposure through several intermediate unlisted entities at Rs. 7,984 crore (including interest), which the company had voluntarily and publicly disclosed even before the commencement of forensic audit to its auditors, regulators, lenders, and also in the latest annual financial statements which were duly approved by the shareholders.

In the Company's Annual Report dated 13 August 2019 for the financial year 2018-19 (page no. 72 and 128), the following disclosures have been done: "During the Financial Year, the Company had advanced loans under the 'General Purpose Corporate Loan' product to certain bodies corporate including some of the group companies. All the lending transactions undertaken by the Company are in the ordinary course of business, the terms of which are at arms' length basis and the same do not constitute transactions with related parties. However, the Company's borrowers in some cases have undertaken onward lending transactions and it is noticed that the end use of the borrowings from the Company included borrowings by or repayment of financial obligations to some of the group companies."

"Loan advanced under the 'General-Purpose Corporate Loan' product with significant deviations to certain bodies corporate including group companies and outstanding as at March 31, 2019 aggregating to Rs 7,849.89 crore and secured by charge on current assets of borrowers. As stated in the said note, majority of Company's borrowers have undertaken onward lending transaction and end use of the borrowings from the Company included borrowings by or for repayment of financial obligation to some of the group companies."

Prior to the commencement of the forensic audit and also as a part of the forensic audit, the company has transparently submitted full and complete details to its auditors, regulators, lenders, and also in the latest annual financial statements which were duly approved by the shareholders, to conclusively establish that the aforesaid amount outstanding of Rs. 7,984 crore has almost entirely been utilised by the potential group entities only for making payments of principal repayment and interest to banks, financial institutions, NBFCs, NCD holders, etc. There is no adverse finding in this regard either, in the forensic audit report.

Based on completion of the forensic audit, the company has now requested its bankers to proceed on a fast-track basis with the debt resolution plan under "change of management and control" in the overall interests of all lenders, including over 20,000 retail NCD holders, and over 8 lakh shareholders.

Source: IANS