Auditor Sounds Alarm on Indostar’s Responsibilities

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Bombay : The auditor of Indostar Capital Finance has expressed doubts about the ability of the non-banking financial company to continue its operation, according to a filing of the Stock Exchange.

NBFC said its auditor Deloitte Haskins and Sells LLP observed that its total liabilities exceeded total assets maturing within 12 months of 2,206 crore, and for some borrowings, gross NPA and net NPA exceeded the thresholds.

“As noted in note 12 of the statement, total liabilities exceed total assets maturing within 12 months of 220,604 million ( 2,206 crores), and for some borrowings, the gross non-performing assets (GNPA) and/or net non-performing assets (NNPA) ratios exceeded thresholds due to an additional impairment provision recorded during the year. These events or conditions, along with other matters set forth in Note 12 of the Statement, indicate that there is material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern,” Indostar said. in its stock market filing on Saturday.

On March 31, the Company’s Audit Committee approved the appointment of Ernst & Young LLP (EY) as an independent external agency to review the policies, procedures and practices relating to sanctioning, disbursement and collection of the commercial vehicle loan portfolio.

After its review, EY found irregularities in its commercial vehicle loan portfolio, which will require the company to make an additional provision of 557–677 crore.

According to Indostar, preliminary findings showed deviations from the company’s credit policy in loan approvals to existing customers, waivers in foreclosure cases and adherence to due process in loan recasting. The review should be completed with the finalization of the audited financial statements for FY22, he said.

Indostar’s March quarter loss widened sharply to 754 crores of 317 crores in the same period last year. The financial results for the June quarter and the year ended March were delayed due to audit reviews. In response to the audit committee’s observations, management stated that the company would be able to pay its dues when due and realize its assets in the normal course of business.

“After the end of the year and until the adoption of these financial results, the company has raised additional funding of 117,000 lakhs from banks and financial institutions based on the support of the company promoters. As of March 31, 2022, the company complied with the required capital ratios and had cash and cash equivalents, accumulating 7,180,000,000 ( 71.8 crore), liquid investments comprising 29,403 million ( 294 crore), and has a pool of loan assets eligible for securitization in case lenders recall loan agreements. As of the date of adoption of these financial results, none of the lenders has recalled any loans,” the company said.

In addition, management can also raise additional funding by monetizing part of its stake in its IndoStar Home Finance Pvt unit. Ltd after board approval, he added.

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