No evidence of Dewan Housing Finance Corporation Limited forming shell companies to divert funds: Auditor

Mumbai: Dewan Housing Finance Corporation Limited (DHFL) stock price surged 20 per cent in the exchanges on Wednesday. This was after the company said in a regulatory filing that an independent Chartered Accountant’s firm found no evidence of DHFL creating shell companies to divert funds. In January, the investigative media outlet Cobrapost claimed that the primary promoters of DHFL siphoned off over Rs 31,000 crore of public money through loans and advances to shell companies and other means to create private wealth for themselves.

Following the report by the CA firm, the stock price of the housing finance company surged over 20 per cent on the NSE, during the early trade on Wednesday. It closed by over 11 per cent upwards. DHFL did not promote any of the 26 shell companies `to have siphoned off nearly Rs 35,000 crore, independent audit firm T P Ostwal & Associates has said. “There is no evidence of DHFL forming shell companies to divert funds, promoters hiding shareholding in any companies and insider trading,” said the audit firm’s report.

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 as that of directors and auditors, the news portal had alleged. The TP Ostwal report refuted Cobrapost claims and said there was no merit in allegations that Rs 14,282 crore loans were sanctioned to 45 borrowers, which are alleged to be a part of Sahana Group/Wadhawan Group.

“Loans were disbursed to only 10 of the alleged 45 companies, totalling Rs 4,715 crore–of which Rs 1,640 crore was repaid by borrowers up to December 2018,” it said. TP Ostwal & Associates LLP also found Cobraposta’s allegations baseless and without merit. “We were unable to find evidence to support the allegations that the promoters have concealed shareholding in the companies, neither did we find any evidence to support the allegation of insider trading,” said the audit firm.

However, the accounting firm found certain instances of deviations and non-adherence to the terms of sanction of loans having major risk implications, especially in relation to post-sanction monitoring of fund use by borrowers. Also, certain lapses and departures from the standard operating procedure and policies laid by the company were identified. These lapses, the report said, point to deficiency in the adherence with the policies in several instances.

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