mumbai | friday, 1 february 2019 panel finds chanda’s dhfl...

SHRIMI CHOUDHARYNew Delhi, 31 January

The Srikrishna committee hasfound severe breach of cor-porate governance and dis-

closure norms by Chanda Kochhar,ICICI Bank’s former chief executiveofficer and managing director, in therestructuring of debt of at least sixcorporate accounts other than thatof Videocon Industries, said a per-son privy to the panel’s findings inthe ~3,250-crore ICICI-Videoconloan case. According to him, the panel has

pointed out favouritism and conflictof interest with regard to credit dis-bursement to these firms. Thesefirms underwent refinancing andrestructuring, which was approvedof by the bank’s credit committees.“Some loan accounts/borrowersclearly showed that she failed in herfiduciary responsibility, and in factmisused her position. In that case,she ought to either disclose or recuseherself from the bank’s credit com-mittee where she played a vital rolein approvals,” the person added. On the Videocon loan account,

the panel cited a forensic audit asevidence showing a nexus betweenKochhar, her husband DeepakKocchar and Videocon ChairmanVenugopal Dhoot. The panel alsoexplained the trail of a ~64-croreloan transferred to NupowerRenewable and other beneficiariesof the deal. Besides, it recommended the

bank strengthen its credit facilitiesprocesses, especially those relatedto conflict of interest. However, thepanel was silent on the role of creditcommittees conclusive outcome inthe matter. The private lender-appointed

committee, headed by formerSupreme Court Justice B NSrikrishna, submitted its findings tothe board on Wednesday, followingwhich the lender decided to stop allunpaid retirement benefits toKochhar and also recover bonusespaid to her since 2009.The bank in a statement said

Kochhar “ineffectively” dealt with“conflict of interest and due disclo-sure or recusal requirements" whiledeciding on loans given to VideoconGroup, in which her relatives hadclose business interests.

After examining the Srikrishnaprobe report, the board tagged theseparation of Kochhar from thebank as ‘Termination for Cause’.Last week, the Central Bureau of

Investigation (CBI) filed an FIRagainst Kochhar regarding quid-pro-quo allegations in the loan givento Videocon Group. The FIR alsomentioned that the role of formerICICI Bank chairman KV Kamathand current MD & CEO SandeepBakhshi, along with other seniorbankers, in the matter might beexamined. Kochhar had denied the allega-

tions following the first whistle-blower complaint, originally madein 2016. The bank's board had earliershowed full support to the thenCEO. Other than the CBI, the Income

Tax department and the SecuritiesExchange Board of India (Sebi) havebeen investigating the case. Thereport would help these agenciesfinalise the case. In a statement,Kochhar said she has not been givena copy of the report, and that shewas “utterly disappointed, hurt andshocked by the decision.”“I reiterate that none of the credit

decisions at the bank is unilateral.ICICI is an institution with estab-lished robust processes and systemswhich involve committee based col-lective decision making with severalprofessionals of high calibre partic-ipating in the decision making.Hence the organization design andstructure obviate the possibility ofa conflict of interest,” she stated. Kochhar said in her 34 years at

the bank, she served with dedicationand hard work, and that she nevershied away from taking tough deci-sions whenever required in the bestinterest of the bank.

ECONOMY 9>

MUMBAI | FRIDAY, 1 FEBRUARY 2019

Panel finds Chanda’sconflict of interest in6 corporate accountsSays severe breach of disclosure norms in restructuring of debt

n Cites a forensic audit asevidence showing a nexusbetween Chanda Kochhar,Deepak Kocchar and VenugopalDhoot

n Explains the trail of a ~64-crore loan transferred toNupower Renewable and otherbeneficiaries

n Suggests the bank strengthenits credit facilities processes,especially those related toconflict of interest

What report says

DHFL under scanner for divertingloans, could hit sector investmentANUP ROYMumbai, 31 January

The corporate affairs ministry hasstarted inquiring into allegationsof Dewan Housing FinanceCorporation (DHFL) diverting~31,000-crore loans and wouldseek more information from thehousing finance firm, a senior gov-ernment official said on Thursday.“We have started verifying them…we will also call for informationfrom DHFL,” the official said.But will the enquiry or the alle-

gations severely affect DHLF’sbusiness? Analysts said thechances are slim, though themacro effect on the sector couldbe more pronounced.DHFL is in the eye of a storm

after a report by Cobrapost thatthe company, through layers of 45shell companies, allegedlysiphoned off ~31,000 crore out ofthe total bank loans of ~97,000crore. The promoters allegedlybought assets overseas and evena cricket team in Sri Lanka. The management has denied

the allegations. In a clarificationto the exchanges, DHFL also saidit has not received any communi-cation from the corporate affairsministry “in relation to any probeagainst the company”. The com-pany’s shares on the BSE fell 15.9per cent on Thursday to ~135.85 apiece from ~161.6 per share onWednesday.Analysts said the alleged

amount might be an exaggera-tion, and that several things weregoing in favour of the company.First, it has never defaulted on

loan payment; it paid back ~17,876crore between September 24 andDecember 31 last year. Thisincludes commercial papers,bank loans, external commercialborrowings, and bonds. Their liq-uidity status is good and theyhave deep credit lines. They also have a good asset

base, focused on semi-urban andrural areas. This generates goodrevenue. They would find buyers

easily for these.

Macro impactThe effect of the allegations andenquiry could be macro, saidanalysts.

DHFL is the second-largestnon-banking finance company(NBFC) for mortgages. Allegationsof mismanagement against it,close on the heels of the IL&FS cri-sis, does not bode well for the sec-tor. Raising funds is a challenge;this could damage the confidencein the eco-system further.NBFCs, struggling to raise

money from institutions, havesuccessfully tapped the retail seg-ment. DHFL itself has raised~10,000 crore through retailbonds. Even though they areunlikely to default, when theyreturn to the bond market, mobil-ising funds will be very difficult,said analysts.“If a single company hits the

confidence channel, it becomesdifficult for others to raise funds,too. The DHFL issue may stifleretail bond participation, whichwas coming up nicely,” said anexecutive at a rating agency whodid not want to be named. Established in 1984, DHFL’s

business interests range from realestate financing, SME loans,housing construction loans, loansagainst properties etc. It has an“AAA” rating.

DHFL and the NBFC crisisIn September last year, DSPMutual Fund tried to sell a DHFLbond in the secondary market,but buyers were few. DSP sold~300-crore papers at a yield at 11per cent. This was about 100 basis

points higher than what thepapers were sold at beforeSeptember and created animpression that the housingfinance company was sufferingfrom liquidity issues. The stocks were hammered,

falling to ~350.55 per piece onSeptember 21 to ~610.55 per shareon September 19 — a fall of about43 per cent. But, the stocks recov-ered after the managementassured investors that all was well.Analysts said in the light of the

Cobrapost report, it seems that thegroup of investors who hammeredthe DHFL stock then could havealready known about it. They alsosaid defaults by the IL&FS trig-gered a crisis in the NBFC sector;

DHLF was the worst hit.This is the not the first time

DHFL management has comeunder the scanner. In Decemberlast year, Moneylife noted that thecompany used poor disclosuresto boost its valuation.The company borrowed from

two mutual funds and indirectlyinjected the money into DHFL toboost net worth. The companywrote a put option for the promot-ers without disclosing it properly,despite being a publicly listedcompany, according to Moneylife.“DHFL is not transparent, but notinsolvent either,” said an analysttracking the company. “Theyhave probably lent to their realestate arms as the sector is notgetting ready finance. The under-standing could be that the moneywill be returned with interestupon completion of the projects.In the worst case scenario, it isround-tripping of funds, but notnecessarily siphoning off.”

The road aheadThere is a difference betweenIL&FS and DHFL. In the case ofthe former, cash flow had stoppedand debt-servicing stopped.DHLF looks like it can still man-age its financial obligations. Therisk of default does not seem toohigh.But the company will have

trouble raising funds till the cloudof uncertainty clears, said ana-lysts. The company has enoughliquidity to fund its operations forthe next four-five months. In the meanwhile, DHFL has

become averse to lending tomaintain balance sheet liquidity,said analysts, adding that this ispotentially a bad move.“NBFCs can leverage up to 10

times and banks can leverage 15times of their net worth, but theoption for banks is to remainafloat through their treasury oper-ations, but an NBFC scaling backon lending is a potential red flag,though conservatism is good foryour liabilities,” said an analyst.

Chanda Kochhar, ICICI Bank’sformer chief executive officer,has denied allegations

DHFL LIABILITIES OUTFLOW (~crore)24 Sep - 31 Dec '18

Commercial paper 9,965

Term loans/ECB/NHB 4,306

NCD 1,657

Fixed deposits 1,948

Total 17,876

FRESH FUNDING MOBILISED (~crore)24 Sep - 31 Dec '18

Portfolio sell down 11,873

NCD 2,750

Commercial paper 575

Bank borrowings 500

Fixed deposits 592

Total 16,290Source: Company filing

FORM NO. 91Form of advertisement

[See rule 199(4)] METCO COLORS (INDIA) PRIVATE LIMITED(IN MEMBERS VOLUNTARY WINDING UP)

Notice is hereby given that a meeting of contributories/ Shareholders in the above matter will be held at the registered occe of the Company at 105 A, Kartik Complex, New Link Road, Andheri (West), Mumbai - 400053 on the 7th day of March 2019 at 11 o’clock in the morning.Agenda: To lay account of the acts and dealings and of the conduct of the winding up during the preceding year i.e. 13th December 2017 to 12th December 2018, together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the liquidation as per provisions of section 496 of the Companies Act, 1956. Proxy forms are available at the occe of the Liquidator. Proxies to be used at the meeting must be lodged with the Liquidator not later than 11 o’clock in the morning on the 5th day of March 2019.

For Sanjay Sangani & Co. Company Secretaries

Sd/-Sanjay Sangani (Proprietor)

(Liquidator)Unit No. 86, eird Floor, Ratna Jyot Industrial Estate,

Irla Lane, Vile Parle (West), Mumbai – 400056. Dated this 30th January, 2019

Notice of Meeting

Technocraft Industries (India) LimitedRegd. Office: Opus Centre, 2nd Floor, Central Road, MIDC,

Andheri (E), Mumbai - 93Tel: 4098 2222; Fax No. 2836 7037;

CIN: L28120MH1992PLC069252Email: [email protected],

website: www.technocraftgroup.com

NOTICEPursuant to Regulation 29 (1) (a) read with Regulation 47 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015,notice is hereby given that a Meeting of the Board of Directors of theCompany will be held on Wednesday, February 13, 2019, inter- alia toconsider and approve the un-audited standalone Financial Results forthe quarter & half year ended December 31, 2018.This intimation is also available on the website of the Company atwww.technocraftgroup.com and on the websites of the Stock Exchangeswhere the shares of the Company listed at www.bseindia.com andwww.nseindia.com.

For Technocraft Industries (India) LimitedSd/-

Place: Mumbai Neeraj RaiDate: January 31, 2019 Company Secretary

9‘w§~B©, ewH«$dma, 1 ’o$~«wdmar 2019

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mumbai | friday, 1 february 2019 panel finds chanda’s dhfl...

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