Can Fin Homes Ltd to take Rs 38.5 crore hit in Q2 due to fund fraud

Can Fin Homes Ltd is preparing to take a one-time hit of approximately Rs. 38.53 crore in the second quarter, ending in September, due to a fund management fraud in Haryana. As part of a company-wide clean-up, the Bengaluru-based mortgage lender relocated over 100 employees, including those from branches across the nation, in July.

Suresh Iyer, the company's managing director and chief executive officer, told Business Standard that the lender plans to provision the fraud-related loss in a single instalment out of its current quarter profit (ending September 2023). This comes in response to a fraud incident at a branch in Ambala, Haryana. Can Fin Homes posted a net profit of Rs. 183.46 crore in Q1 FY24.

Based on an initial investigation, the fraud seems confined to the aforementioned branch. Iyer claimed that there is no impact on the company's assets or asset quality. Can Fin Homes' shares have closed 3.26 per cent lower at Rs. 746 per share on BSE.

In a filing with BSE on July 25, the company revealed that employees of its Ambala branch had committed fraud over time by transferring funds to various personal bank accounts, misusing their cheque signing authority.

Can Fin Homes has approached 11 banks to track the funds in the accounts allegedly held by the culprits.

This marks the second time the company has fallen victim to fraud in recent quarters. In May 2022, it reported a fraud involving fake income tax returns in 37 accounts at the Can Fin Homes branch in Bhilwara.

In addition to filing a First Information Report (FIR) with the Haryana police for fund misappropriation, the company has taken a series of internal steps including centralising disbursement and fund reconciliation work.

Employees who had been working in a branch for more than five years consecutively have been transferred nationwide.

Some were relocated before the fraud was discovered, while others were moved following detection.

Can Fin Homes has already reported the details of the fraud and preliminary action taken to its supervisory body, the National Housing Bank.

The lender also plans to submit necessary reports to the appropriate authorities within the prescribed timelines, Iyer added.

Regarding the company's business performance, Iyer noted that the company expects to grow its loan book by 18 to 20 per cent year-on-year (YoY) in FY24.

In the first quarter, the company's loan portfolio expanded by 18 per cent YoY to Rs. 32,505 crore.