Kolkata: A forensic audit on the fraud-hit Sambandh Finserve showed that the company diverted about Rs 100 crore to entities having connection with its promoters. The audit report also confirmed the allegations that about 69% of loan assets were inflated and done through dummy accounts to secure funding from banks and other lenders.
Ernst & Young, which conducted the forensic audit, submitted its final report in the last week, people familiar with the development told ET.
The consultant reported that the fraud has been taking place since 2012.
The company diverted funds to entities such as Diya Dairy & Agroprocessors Pvt Ltd, Kshama Foundation, Regional Rural Development Centre (RRDC), DK Enterprises, Utkal Dairy. Funds were also diverted to individuals, people privy to the report said.
“We are in the process of seeking compliance from Sambandh on the fraud and on what action the company is taking after the forensic audit. Our members including lenders and other practitioners are concerned about the fallout on the microfinance sector as a whole,” said P Satish, executive director at Sa-Dhan, one of the self-regulators for the sector.
The fraud came to light in October when senior officials of the company including chief financial officer James Raj reported against chief executive Deepak Kindo for allegedly pressuring them to create dummy accounts and siphon off funds. The letter was also signed by accounts head Felix Xess, MIS head Budhnath Oram and internal audit head Elias Lugun.
The company has assets under management (AUM) of merely Rs 120 crore in 73,000 loan accounts, while it declared an inflated figure of Rs 383 crore. It started defaulting on payments to lenders on September 30. More than 30 lenders including ICICI Bank, IDFC First Bank, Northern Arc Capital have a collective exposure of about Rs 400 crore to it.
Base of Pyramid Asia (BOPA) held 37.03% in Sambandh at the end of March, while Dia Vikas Capital has 25.29% interest with Small Industries Development Bank of India having 8.88%. The balance is held by the promoter and promoter group.
The EY report suggested that promoters have perhaps infused capital in Sambandh, using the funds it received via fund diversion. According to a Brickworks Ratings India report, promoters infused Rs 15.89 crore in FY20, helping the net worth to rise to Rs 72.92 crore.
The Rourkela-based MFI started business in 2006 as an exclusive project under RRDC, an Odisha-centric NGO promoted by Livinus Kindo, who is now the chairman of the company. Sambandh secured an NBFC-MFI licence from the Reserve Bank of India in 3013 and has about 100 branches in 39 districts across Odisha, Chhattisgarh, Jharkhand, Bihar and Gujarat.
Ernst & Young, which conducted the forensic audit, submitted its final report in the last week, people familiar with the development told ET.
The consultant reported that the fraud has been taking place since 2012.
The company diverted funds to entities such as Diya Dairy & Agroprocessors Pvt Ltd, Kshama Foundation, Regional Rural Development Centre (RRDC), DK Enterprises, Utkal Dairy. Funds were also diverted to individuals, people privy to the report said.
“We are in the process of seeking compliance from Sambandh on the fraud and on what action the company is taking after the forensic audit. Our members including lenders and other practitioners are concerned about the fallout on the microfinance sector as a whole,” said P Satish, executive director at Sa-Dhan, one of the self-regulators for the sector.
The fraud came to light in October when senior officials of the company including chief financial officer James Raj reported against chief executive Deepak Kindo for allegedly pressuring them to create dummy accounts and siphon off funds. The letter was also signed by accounts head Felix Xess, MIS head Budhnath Oram and internal audit head Elias Lugun.
The company has assets under management (AUM) of merely Rs 120 crore in 73,000 loan accounts, while it declared an inflated figure of Rs 383 crore. It started defaulting on payments to lenders on September 30. More than 30 lenders including ICICI Bank, IDFC First Bank, Northern Arc Capital have a collective exposure of about Rs 400 crore to it.
Base of Pyramid Asia (BOPA) held 37.03% in Sambandh at the end of March, while Dia Vikas Capital has 25.29% interest with Small Industries Development Bank of India having 8.88%. The balance is held by the promoter and promoter group.
The EY report suggested that promoters have perhaps infused capital in Sambandh, using the funds it received via fund diversion. According to a Brickworks Ratings India report, promoters infused Rs 15.89 crore in FY20, helping the net worth to rise to Rs 72.92 crore.
The Rourkela-based MFI started business in 2006 as an exclusive project under RRDC, an Odisha-centric NGO promoted by Livinus Kindo, who is now the chairman of the company. Sambandh secured an NBFC-MFI licence from the Reserve Bank of India in 3013 and has about 100 branches in 39 districts across Odisha, Chhattisgarh, Jharkhand, Bihar and Gujarat.
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