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How ever-greening & window dressing became the norm at IL&FS



IL&FS Financial Service

New Delhi, June 8 (IANS) India has seen many financial scams, but none that can match the scope, size and magnitude of shadow bank Infrastructure Leasing & Financial Services Limited (IL&FS). Like an onion, the more one peels the more the tears and pungence.

The top secret Ministry of Corporate Affairs withering summary of the construct of IFIN (IL&FS Financial Services) and the tell all of corporate shenanigans that emerges from the audit of lending by Deloitte and Haskins and Sells (DHS) for the last 10 years is a shocking tale of opportunism, ever greening and window dressing by the management.

A systemic malaise governed the way business was conducted, aided and abetted as it was its auditors who were involved in the cover up. Corporate governance, ethics, transparency, best of breed practices and all other fail-safe measures took a back seat as the management made hay, compromising all the functions with ease.

Funding Defaulting Borrowers

The engagement team and engagement partners of DHS had the awareness of the company’s modus operandi of funding the defaulting borrowers for payment of interest and principal in a fraudulent manner by the management again and again to window dress the asset book of the company for several years. The auditor was thereby complicit in nature with the management.

The investigation team found a document in the email server of IL&FS prepared by the DHS Engagement team identifying the funding of borrowers for paying principal and interest.

The said email was sent by Rakesh Jain, Senior Manager, DHS, to Payal Rathod, Assistant Manager, DHS, on May 9, 2018 at 10.24 a.m. The said email contained excel files namely “Non Group Evergreening cases 25042018.xlsx” given below:

Client: SKIL Group

ET Observation: Interest & Principal Repayment Funding

1) Security valuation and exposure is at 0.45x. Interest funding in future may lead to reducing in security cover.

2) Interest income earned is through invocation of shares, this will put the principal portion exposed.

3) As per information available in public domain, ADAG group and SKIL group filed legal case on each other which will delay CDR exit process and in result SKIL group will not be able to pledge additional 4 crore REDL shares which were going to be released by the bankers as per CDR.

4) Significant portion is unsecured.

Client: Parsvnath

ET Observation: Interest & Principal Repayment Funding

1) Total disbursements in the 12 months amounted to Rs 101 crore (including Rs 75 crore new facility) which has been recovered by way of Principal Repayment of Rs 55 crore and interest received of Rs 34 crore.

2) New facility of Rs 75 crore disbursed to Parsvnath Rail Land Project Pvt Ltd (PRPPL) in December 2017 and got the repayment of Rs 55 crore in same months from PRPPL against the facility which was due in September 2017. Issue of evergreening as the loan was given to same party which was utilised to service an loan which was going to become NPA.

TDS issue

TDS has remained outstanding for the period from AY 15-16 aggregating Rs 6.96 crore (including Rs 2.60 crore for AY 2018-19) (Total of All Facilities)

Security Issue

1) Group security cover was stipulated to be 2x, whereas at present it is only at 1.16x(332/269)

Client: KVK Energy & Inf”a (“K”IPL”)

ET Observation: Interest Funding

1) Interest has been funded in the past 12 months, wherein total Rs 6.67 crore interest has been received and Rs 6.75 crore (3.2+1.85+1.70) has been disbursed.


Significant portion is unsecured.

Client: Adhunik Meghalaya Steel Pvt. Ltd.

ET Observation: Interest & Principal Repayment Funding

Interest income and part principal repayment has been funded by way of invocation of Shares, wherein total invocation in the 12 months amounted to Rs 5.89 crore which has been used to repay Principal of Rs 3.07 crore & interest of Rs 2.84 crore.

Also the facility has turned NPA, and has been shown as sub standard as on 31st March 2018.

Security Shortfall

1) Significant deterioration in security cover from 2x to 0.14x, and being promoter funding loan, it poses a potential threat to the repayment, and to be considered as a loss assets.

Rollover and Recoverability

Rollover has been made (14th December 2017) after the principal was due (17th September 2017). This is in contravention of the firm policies whereby facilities where default is subsisting have been rolled over. Also, in the event that the interest is recovered from pledged shares, the security left would be (52-(5*6))=22 mn against a principal of 215 mn. This would further reduce the possibility of successful repayment of Principal balance.

Client: Ind Bharath

ET Observation: Interest & Principal Repayment Funding

Interest income and repayment in the 12 months has been funded by way of disbursements, wherein total disbursements in the 12 months amounted to Rs 115 crore which has been recovered by way of Principal Repayment of Rs 105 crore & balance Rs 10 crore is recovered by way of interest (out of total interest received of Rs 35.84 crore).

Existence and Valuation of Security

1) Security value includes Rs 136 crore receivable of the borrower from Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) hypothecated to IFIN, Collectibility of receivables needs to be assessed. Out of Rs 136 crore receivables, Rs 90 crore is deposited by the borrower with the Court however no documentary evidence available and also for balance Rs 46 crore receivable no status available.

2) Additional security, in the form of second charge on 38 per cent shareholding in IBTPL (Ind Bharath Thermal Power limited) and some other movables and immovables, to be created. Time taken for the same from CoD, up to six months from Date of Disbursement (DoD – 10th October 2017).

Other Repayment Issues

1) The company (IFIN) has started the litigation against Ind Bharath, Status to be provided for the same. The company has incurred about 23 million on account of Court fees and Legal Counsel fees during the year.

Client: Flemingo Group

ET Observation: Interest and Principal Funding

1) Interest to be extent of Rs 42 crore and overdue principal of Rs 235 crore has been funded by way of Disbursements of new facility. Security creation under process for new facility.

2) CAM review pending since September 2017 for Oscar Infra.

3) Out of total security, Rs 101 crore security is hypothecation of Loan Receivables under the Loan extended by Bermaco to South Asian Project Management Co. Pvt. Ltd. For this, a confirmation letter has been obtained from Bermaco, however Financial Statements of Bermaco is not available.

4) IFIN has not received the Audited Financials of Borrower company Oscar Infra for FY15-16 and FY16-17, and Audited Financials of Geowork Infra for FY16-17.

Security Issue

Significant portion unsecured

Client: ABG Group

ET Observation: Interest income to the extent of Rs 58 crore has been funded through disbursement of additional facility. Considering that the income/principal will come only from security coverage and considering that the exit strategy is still 3 years away, recognition of income would only lead to higher exposure to the group for recovery.

Client: Unitech

ET Observation: Interest Funding

Interest of Rs 5 crore has been funded by invocation of security and balance of Rs 39 crore by way of disbursements of new facility to Havelock.

Client: Champion Agro/Bay Capital

ET Observation: Principal Funding

Repayment of Doubtful loan facility to Champion Agro of Rs 30 crore and Security Deposit placed for Doubtful loan of Rs 10 crore and Interest Repayment of Rs 4 crore is by way of disbursement of Rs 44 crore facility to Bay Capital.

Client: SREI Group

ET Observation: 1) Security Creation

Credit Facilities to Attivo of Rs 305 crore are secured by second charge over borrower movable and immovable assets which is not created till 31st March 2018, as senior lenders NOC are pending.

Credit Facility to Sahaj E village of Rs 370 crore are secured by hypothecation of current and fixed assets which is not created till 31st March (pending since March 2017), as senior lenders NOC are pending.

Credit Facility to Bharat Road Network (Rs 70 crore) is secured by way of hypothecation of current and fixed assets, which is not created till 31st March 2018 (pending since March 2017) as senior lenders NOC are pending.

Principal and Interest recovery

1) Sahaj E Village is a non project company with no or negligible revenue. How is repayment of Principal and servicing of Interest is envisaged from such companies?

Also Attivo Economic Zone is a project company with very little revenue. How is repayment of Principal and servicing of Interest is envisaged from such companies?

Coupon rate on all 3 facilities is 12.75 per cent. On comparison of the same with the average lending rate of IFIN to other borrowers and security being second charge, the Interest rate seems to be very low.

Client: Kohinoor Group

ET Observation: Interest Funding

Interest has been funded in the year, whereby Rs 14.5 crore has been received by way of disbursement of Rs 18.2 crore.

Client: HDIL Group

ET Observation: Interest Funding

Interest has been funded in the year, whereby Rs 21.92 crore has been received by way of disbursement of Rs 21.45 crore.

Client: GHV Group

ET Observation: Indirect Exposure

Of the total amount – Rs 360 crore has been disbursed to ITNL directly on the ‘borrower’s specific request and Interest for the same has been received from ITNL.

1) Why should the same not be considered as an exposure to ITNL?

2) What is the basis for booking Interest income received from ITNL when no specific instructions have been received from the Borrower or ITNL?

Client: DB Realty Group

ET Observation: Interest Funding

Interest has been funded in the year, whereby Rs 17.01 crore has been given to receive Rs 15.68 crore towards interest in the year.

From the above it is clear that the engagement team of DHS was aware that there were several instances of funding interest and principal by IFIN to its defaulting borrowers for avoiding these accounts becoming NPA and also for avoiding the consequent provision.


Trump’s decision to cut troops in Afghanistan creates policy vacuum





New York: President Donald Trump’s decision at his administration’s sunset to pull back US troops from Afghanistan and Iraq is among his final attempts to keep his original campaign promise, but creates a policy vacuum and complicates the transition to Democrat Joe Biden in January.

Acting Defence Secretary Christopher Miller’s announcement that the US troop strengths in those two countries would be reduced to 2,500 each by January 15 – just five days before Biden takes over – creates a policy vacuum there.

Miller said on Wednesday, “In the coming year, we will finish this generational war and bring our men and women home.”

The war that began in 2001 to root out the Al-Qaeda that carried out the 9/11 attack on the US, and the Taliban than allowed to operate from Afghanistan, has claimed about 2,350 US lives and left more than 20,000 wounded.

Trump had promised in his 2016 campaign to bring all US troops home.

The troops remaining in Afghanistan and Iraq are to defend the US diplomatic and other facilities there.

There was a confluence of views between Trump and some Democratic leaders and opposition from Republicans and the NATO.

The House of Representatives Armed Services Committee Chair Adam Smith, a Democrat, said, “Reducing our forward deployed footprint in Afghanistan down to 2,500 troops is the right policy decision. At the same time, this reduction must be responsibly and carefully executed to ensure stability in the region.”

But the committee’s Republican leader Mac Thornberry warned Trump, “These additional reductions of American troops from terrorist areas are a mistake.”

“Further reductions in Afghanistan will also undercut negotiations there; the Taliban has done nothing – met no condition – that would justify this cut,” he added.

The peace agreement with the Taliban, which was seen as a precondition for troop withdrawal, has yet to materialise and the terrorist group has continued attacks in Afghanistan.

“The price for leaving too soon or in an uncoordinated way could be very high,” NATO Secretary-General Jens Stoltenberg said in Brussels.

He warned that Afghanistan risks becoming again the centre of international terror with the Islamic State (ISIS) moving there to rebuild “the terror caliphate it lost in Syria and Iraq.”

While Biden has committed to end the “forever wars in Afghanistan and the Middle East” and to “narrowly focus our mission on Al-Qaeda and ISIS,” neither he nor his transition team has reacted to the preemptive move by Trump.

Trump’s action would make policy-making and implementation difficult as soon as he takes over. It is compounded by him and his transition team being cut out of briefings and denied access to officials and information.

As vice president, Biden had been sceptical of his President Barack Obama’s troop surge in Afghanistan, when the force-strength was increased from about 30,000 when he assumed office in 2009 to nearly 100,000 in about a year as he attempted to decisively crush the terrorists in hope of a pull out.

Pakistan has been a key figure in the region, playing all sides. It has benefited from the US invasion of Afghanistan after the 2001 attacks on the US the Al-Qaeda, which was protected by the Taliban and Islamabad, which gave that group’s leader Osama Bin Laden asylum.

Pakistan Prime Minister Imran Khan visited Kabul for the first time on Thursday, a day after the US announced the troop cutback, but according to reports did not say anything about it.

The US-backed Kabul government has been suspicious of and critical of Pakistan for its backing of the Taliban.

But now President Ashraf Ghani will have to come to terms with Islamabad, which had facilitated the peace between the Taliban and the US, with nominal participation of the Kabul government in the process.

As the patron of the Taliban, Khan will wield more direct influence over Afghanistan as Washington winds down its involvement.

But on the other hand, when the US involvement is minimised and troops are no longer active beyond the protection of US resources, Islamabad’s leverage is also reduced because US troops would no longer be vulnerable to cross-border terrorism and terror attacks by Pakistan’s proxies and therefore will not have to be deferential to it.

Nor would Islamabad be able to exert influence by manipulating Taliban diplomacy.

The danger for Pakistan and the world will be the rise of the ISIS in an Afghan vacuum. Islamic State’s Khorasan Province (ISIS-K) group has been a threat to both Afghanistan and Pakistan and Islamabad will have to contain it and similar groups for its own protection – and not make a deal with them lest it face a backlash from the US.

There has been no signs of opposition in the Pentagon to the troop withdrawal.

After Miller took over the defence portfolio when Trump fired Secretary Mark Esper days after the November 3 election there has been a change in personnel at the top level to douse dissent.

(Arul Louis can be reached at [email protected] and followed on Twitter at @arulouis)

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American democracy loses when most popular candidate is kept from race twice

Sanders’ popularity is now recognized, but after he spelt out the scenario on October 23 in a talk show on how the drama will unfold when votes are counted in these elections, he is well on his way to being prophetic.




Bernie Sanders

It was nice to receive mails from friends who had assembled at Lucknow boy Nusrat Durrani’s Dumbo apartment under the Brooklyn Bridge on November 3, 2016, election night, armed with champagne bottles to be uncorked as soon as Hillary Clinton pipped the post.

In the event, the champagne bottles stood in one straight line on the dining table like a row of brooding bishops. Trump had shocked all the guests. A submarine sandwich hurled as a missile by a despairing guest knocked the lamp over.

I have repeated the above story because that is what history is supposed to be — a continuous repetition of facts. So indelibly etched on my mind is that party in Brooklyn that every US election will bring alive that episode.

There is another reason for that episode to be so etched on my mind. I did not wish to be the only one out of sync with the general mood that evening, but I was in a minority of one who expected Hillary to lose. Having arrived in New York a fortnight ago for a discussion in the various campuses of my book, ‘Being the Other: The Muslim in India’, kept me away from a 24X7 bombardment of punditry on elections.

A cluttering of detail tends to push out of focus the simple, plausible outline conditioning of electoral behaviour. Experience from most electoral theatres had taught me a simple lesson: people were tired of two parties, one indistinguishable from the other.

This was happening at local levels too, even in India. The Aam Aadmi Party’s record 67 out of 70 seats in 2015 was one such wave, smothered by the media which is controlled by the corporates whose key projects in New Delhi were threatened by the untried party. It did not have the ideological spine to withstand the assault from the main political parties and the corporate media. Therefore, the bubble burst. AAP is now an ordinary party circling around power.

There are comparisons between Joe Biden scraping through and Hillary Clinton losing in 2016: neither were popular candidates. They were candidates that the Democratic Party “manoeuvred” as front-runners because on both occasions Bernie Sanders was the most popular candidate, but his democratic socialism was anathema to the establishment.

As soon as it became clear that Sanders was leading the field, the establishment came out, all guns blazing. Thomas Friedman, whom the New York Times values as its star columnist, forgot all decencies of independent journalism and wrote two full columns rooting for former New York Mayor, Michael Bloomberg and a billionaire several times over, as one of the Democratic front-runners. There was no hope in hell that Bloomberg would win (buy) the nomination but, by spending a billion on TV, he would disrupt the game sufficiently for Sanders to advance. “This is a capitalist country,” thundered Bloomberg. To protect his credibility, Friedman admitted in his column, that his wife worked for one of Bloomberg’s charities. This was just one of the umpteen tricks employed to obstruct Sanders.

There was a straightforward reason why Clinton was the wrong candidate. The velocity given to globalization after the Soviet collapse gave a fillip to rampaging capitalism. Inequalities broke all barriers. It did not require Thomas Piketty to enlighten as that even in India barely one per cent of the rich had cornered 51.53 per cent of the wealth. The picture in the US was worse. Occupy Wall Street became a popular movement. It invited a capitalist riposte — the Tea Party. People were disgusted with Washington, which symbolized the US establishment. A quest began for an anti establishment candidate. Just one such candidate appeared to be Bernie Sanders. People were looking for social welfare, universal healthcare, education — exactly what the Bloombergs of the US thought would kill the initiative which made America great. Quite unabashedly, the Democratic Party gave the impression that it was preferable to lose the White House than lose corporate support.

One hoped the shock reversal of 2016 would have taught the Democrats a lesson. Across the Atlantic, Jeremy Corbyn was being likewise thwarted by New Labour. One of their leading lights, Lord Peter Mandelson, had sworn to “undermine” Corbyn. The other day they suspended him. Corbyn was to Mandelson what Sanders was to Bloomberg. This in June 2017 when the latest opinion polls projected Corbyn as the possible Prime Minister. Another example that the establishment trumps the popular will. Whither democracy, then?

At this very time, another reality was allowed to go unnoticed. A Fox News poll showed that Sanders has a +28 rating above politicians on both sides of the political spectrum. At that time, the Guardian’s Trevor Timm wrote, “One would think with numbers like that, Democratic politicians would be falling over themselves to be associated with Sanders, especially considering the Party as a whole is more unpopular than the Republicans and even Donald Trump right now. Yet, instead of embracing his message, the establishment of the party continues to resist him at almost every turn, and they seem insistent they don’t have to change their ways to gain back the support of huge swathes of the country.”

Sanders’ popularity is now recognized, but after he spelt out the scenario on October 23 in a talk show on how the drama will unfold when votes are counted in these elections, he is well on his way to being prophetic.

“In states like Pennsylvania, Michigan, Wisconsin, and elsewhere, Republicans are likely to go to the polling booths to cast their votes. Democrats, are likely to mail in their votes. When counting begins, the votes counted first will be Republican votes for that reason. So, by 10 pm on counting day, Trump will thank his voters and announce victory. But next morning when millions of mails will be counted, the trend will change. That is when Trump will scream murder: I told you they’ll cheat.” Mayor Rudi Giuliani has already elaborated the case in Philadelphia.

(Saeed Naqvi is a senior commentator on political and diplomatic issues. The views expressed are personal. He can be reached on [email protected])

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The US presidential elections and future of India-US relations




Donald Trump Joe Biden

As the coronavirus pandemic dominates global news in the United States, progress toward the next presidential election scheduled to be held on November 3 moves slowly forward. President Donald Trump had no real opposition in the Republican party and is running for re-election. And it has now become apparent that former Vice President Joe Biden will be his opponent as the Democratic candidate for president.

What would a Trump victory bode for the future of US-India relations? What would a Biden victory bode? Let me answer each of those questions in turn.

Given the love fests of Prime Minister Narendra Modi’s ‘Howdy Modi’ event in Houston, Texas, in which Trump participated in September of 2019, and Trump’s ‘Namaste Trump’ event hosted by Modi in India in February of this year, it might be assumed that the future for US-India relations is a splendid one. This would be an incorrect assumption.

Both of these events were more symbolic than substantive. Trump’s participation in them undoubtedly helped to persuade some — perhaps many — Indian American Modi supporters who voted for Hillary Clinton in 2016 to cast their ballots for Trump in 2020. Trump’s campaign team took steps to ensure this by holding an event at his Mar-a-Lago resort in which a group of prominent Indian Americans announced their plans to work for his re-election and to mobilize Indian Americans on his behalf.

To understand the future potential of India’s relations with the US. with Trump as president, however, it is necessary to look beyond these political moves and to examine the present state of those relations and Trump’s personal style.

In a word, the best way to characterize the current relations between the US and India is “functional”. The relationship was relatively good for the first two years of Trump’s presidency. In fact, near the end of 2018, Alice Wells, the Acting Assistant Secretary of State for South and Central Asia, was quoted in the media s saying: “This has been a landmark year for US-India ties as we build out stronger relationships across the board.”

Then, in 2019, the relations went off the track in the first half of the year after the US and India got into a tit-for-tat tariff war after the US terminated India’s Generalized System of Preferences which allowed India to send certain goods to the US duty-free. There have been continuing efforts to structure a “modest” trade deal since then. It was thought there might be some type of deal done in September of 2019 while Modi was in the US by year’s end, and then during Trump’s India visit. But, as of today, there is still no deal.

This inability to get any meaningful trade agreement in place speaks volumes about India’s potential future relations with India with Trump as president. So, too does Trump’s style.

Trump’s campaign slogans this time around are “Keep America Great” and “Promises Made, Promises Kept.” Trump is not a policy wonk and most of his effort will go toward “America First”. This involves making the US more isolated by withdrawing from international agreements, restructuring trade agreements, emphasizing building walls to stop immigrants at the border, using tariffs to block trade with countries who are taking away American jobs, and confronting businesses who are allegedlly stealing American trade secrets.

This perspective suggests what India can expect for its relations with the US if it has to deal with Trump for a second term as president. The relations will stay functional at best. As I have said before, that’s because the words partnership, cooperation and collaboration are not in Trump’s vocabulary. Nationalism, isolationism and protectionism are.

Joe Biden stands in stark contrast to President Trump both professionally and personally. Biden is a strategic thinker and doer with a solid eight-year track record of leadership experience as Vice-President in forging alliances that have made a difference around the world and he has also been a long-standing friend of India.

He was chairman of the Senate Foreign Relations Committee and a leading advocate for the Congressional passage of the Indo-US civic nuclear deal in 2005. At a dinner convened 10 years later in 2015 by the Confederation of Indian Industry and the Carnegie Endowment for International Peace, Vice President Biden discussed the tremendous joint progress that had been made by the two countries in the past and declared “We are on the cusp of a sea change decade.”

Early in his campaign for the Democratic nomination for president in July of 2019, in laying out his foreign policy vision, Biden stated that the US had to reach out to India and other Asian partners to strengthen ties with them. The items on Biden’s foreign policy agenda for strengthening which are of importance for India include climate change, nuclear proliferation and cyberwarfare.

During his vice presidency, Biden worked side by side with President Barack Obama to do things that would contribute to achieving Obama’s vision stated in 2010 of India and America being “indispensable partners in meeting the challenges of our time.” In 2020, those challenges are even greater than they were a decade ago.

That is why it is so essential that India and the US develop a strategic relationship that enables them to become those indispensable partners. That can happen if Biden assumes the presidency on January 20, 2021. It cannot happen if Donald Trump remains as president for a second term.

The results of this upcoming election in the US matter greatly for the future of the United States. They matter greatly for the future of India-US relations as well. Time and the American electorate will tell what that future will be.

(Frank F. Islam is an entrepreneur, civic and thought leader based in Washington DC. The views expressed here are personal)

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