The Enforcement Directorate (ED) money laundering probe in Infrastructure Leasing & Financial Services (IL&FS) has found that the company's financial services arm IFIN had made new investments of about Rs 300 crore in India Cements-owned Chennai Super Kings (CSK) in 2018.
The probe agency is examining the reason behind the fund infusion in a cricket franchise to find out whether the transaction had certain anomalies like other borrowers in this case, said officials aware of the matter.
The federal agency had come across certain loans and investments made by IFIN under special investment category, where the promoter company could get in and out through the investee firm's put and call option. ED is currently studying the arrangement and its legality. The probe agency is likely to call the cricket franchise CSK to understand the modalities of this transaction. The senior management of IL&FS accused in the matter would also be quizzed, said an ED official privy to the development. Further, the ED is contemplating a special audit of the account against the backdrop of rating agencies downgrading various debt papers of IL&FS.
“It was observed in certain instances that fund lent to third parties (borrowers of IFIN) were later utilised by them to finance IL&FS group companies. We are examining whether the said investment had come back to IL&FS Group companies,” said official cited above.
Grant Thronton, appointed by IL&FS new board, had in March flagged off 29 instances where the loan disbursed to borrowers was in turn utilised by their group companies to repay the existing debt obligation with IFIN. These together have a financial implications of Rs 2,502 crore for the five-year period — from April 1, 2013, to September 30, 2018.
The audit firm also identified 16 instances where loans amounting to Rs 1,922 crore were sanctioned on a negative spread (average cost of borrowing rate minus lending rate) or limited spread for companies in financial distress. In seven of these cases, the loans provided have either been written off or are related parties of the companies for whom loans were written off. The cash-starved company has been defaulting on bank loans and other debt repayments since August 2018.
The ED had filed its first prosecution complaint this month in the case for “falsification of accounts” and “circuitous transactions,” officials said.
After the story got into print, CSK replied," there are no dues from CSK owed to IL&FS nor have received any query from ED in this regard.