INSUBCONTINENT EXCLUSIVE:
Infrastructure Leasing Financial Services (ILFS) to borrowers were either unsecured or had inadequate collateral, according to an interim
report by audit firm Grant Thornton India.Grant Thornton was appointed by ILFS' new board after the government took control last October of
the heavily indebted infrastructure financing and construction group, following a string of defaults on debt obligations
ILFS is reeling under debts of Rs 91,000 crore ($12.85 billion)."It appears unusual that for 14 per cent of the loans outstanding to the
external parties as on 30 September 2018, the collaterals are not secured," the internal report, a copy of which was seen by Reuters,
said.It was also unusual for ILFS Financial Services to not have adequate collateral for 21 per cent of the loans outstanding to the
external parties as of September 30, it said.ILFS officials and the ministry of corporate affairs did not immediately respond to requests
for comment.The Grant Thornton report said auditors noticed 10 regulatory or risk assessment issues by ILFS in lending Rs 13,290 crore.It
identified instances where funds which were lent to certain third parties were potentially used by them to provide funds to some companies
of ILFS, mainly ILFS Transportation Networks Ltd (ITNL).ITNL is the biggest subsidiary of ILFS and manages some of the group's most
valuable assets such as road projects."Based on the unapproved minutes of the board meeting held on 11 September 2018, it appears that the
Board of Directors - specifically members of the Board who are also a part of the Committee of Directors - were potentially aware that the
loans provided to third parties were further forwarded/lent to ILFS group companies," the report said.It said auditors also identified
around Rs 2,270 crore of such loans, while loans worth Rs 2,400 crore were given to companies that were under stress despite a negative risk
assessment.The report also noted that loans worth about Rs 94 crore appeared to have been used by the borrowing companies to pay its
promoters and directors.The promoter of one such company is also an existing director of an ILFS group company - a potential conflict of
interest, the report said.($1 = Rs 70.83)
