A major reworking of accounts has brought the scam-tainted IL&FS and two of its arms — IL&FS Financial and ITNL — back among big business headlines, ToI reported on May 6. Following the massive restatement of accounts, IL&FS’s loss has now been estimated at Rs 9,600 crore during the five financial years ending 2017-18.
Originally, a profit of Rs 1,869 crore had been shown by the company management and board — which were later superseded following revelations of huge irregularities that left India’s financial sector shaken.
IL&FS Financial Services (I-FIN) and IL&FS Transportation Network (ITNL), two of the company’s subsidiaries, also have a similar story. After correction of discrepancies in their books, in the fiscal year 2017-18 alone, IL&FS’s losses are now projected at Rs 7,393 crore, contrasting sharply with the previously reported profit of Rs 332 crore, ToI’s report (by Sidhartha)said citing a govt source.
According to information provided to the Ministry of Corporate Affairs, I-FIN recorded losses totaling nearly Rs 5,000 crore over the span of five years, contrasting with previously stated combined profits of Rs 1,602 crore from 2013-14 to 2017-18.
For ITNL, losses over the course of five fiscal years total Rs 1,500 crore, in contrast to the Rs 1,486 crore profits reported by the previous administration. In response to a directive from the National Company Law Tribunal, the new management has submitted the updated financial statements to the government.
An IL&FS spokesperson told ToI: “IL&FS was required to reopen and recast the five-year financials for three entities — IL&FS, IFIN and ITNL — as per the NCLAT order in 2019. The recasting has been completed and the recasted financials have been taken on record by the board of these respective companies. These records have also been forwarded to MCA and filed with NCLT to be taken on record.”
Audit firms EY, Deloitte, and KPMG, along with their chartered accountants, are under scrutiny for failing to detect and disclose the irregularities. The updated financial records once again draw attention to the former management, auditors, and independent directors, who have not faced consequences despite significant fraud occurring under their watch.
Several top executives of the three companies and auditors associated with some of them now face criminal charges due to the irregularities. Additionally, both auditors and their firms are undergoing disciplinary procedures. Meanwhile, the new leadership has divested a substantial portion of assets to settle a significant portion of debts owed to creditors.
In October 2018, the government intervened to take control of the companies, citing board mismanagement. Based on provisions of the Companies Act, the government took action as the management of IL&FS and its affiliated companies faced allegations of negligence and incompetence, including the presentation of misleading financial statements.
The Serious Frauds Investigation Office also conducted an inquiry, finding many instances of governance failure and irregularities within the companies.
