Indiabulls HF, Lakshmi Vilas Bank face probe

Mumbai: Indiabulls Housing Finance (IBHFL) and Lakshmi Vilas Bank, two lenders awaiting the central bank nod for their merger, suddenly find themselves in an unenvious position. A public interest litigation (PIL) has been filed against IBHFL in the Delhi High Court and a first information report (FIR) has been filed against Lakshmi Vilas Bank to investigate allegations of fraud and misappropriation of funds by the lenders.

Shares of IBHFL nosedived 6.11 per cent to Rs 389.45 on the BSE after news reports emerged that the High Court has decided to look into the PIL filed by an NGO that alleged round-tripping of funds by the company.

The Lakshmi Vilas Bank stock slipped 5 per cent, hitting the lower circuit at Rs 36.55 on Friday after the Economic Offences Wing, Delhi, registered a FIR against directors of the bank for alleged cheating, criminal breach of trust, criminal misappropriation and criminal conspiracy.

Shares of Indiabulls Group companies such as Indiabulls Real Estate declined 10 per cent while Indiabulls Housing Finance was down 6.4 per cent, and Indiabulls Ventures plunged 16 per cent.

The petition alleged that IBHFL gave “dubious loans” worth billions of rupees to shell companies through firms owned by the group’s founders “to increase their personal wealth.” The company denies the allegations and Indiabulls Housing’s lawyer Mukul Rohatgi said the alleged loans were secured and most of them stand repaid. The HC has issued a notice to Indiabulls, Reserve Bank of India, Securities and Exchange Board of India and the Ministry of Corporate Affairs. The next hearing will be held on December 15.

In a statement, IBHFL said, “The PIL filed by Citizens Whistle Blower Forum came up for hearing before the Hon’ble Delhi High Court today when the Hon’ble Court was informed that the averments made in the petition are a pack of lies motivated by vested interest and has been filed without any research.”

It also said, of the loans granted to four business groups, “two sof these loans to business groups are fully closed with no outstanding dues and loans to two other business groups are secured loans granted in the normal course of business and are being serviced regularly.”

Recently, credit rating agency CARE had revised Indiabulls Housing Finance’s long-term rating from CARE AAA to CARE AA+, the perpetual debt programme rating from CARE AA+ to CARE AA, and reaffirmed short-term rating at CARE A1+. The main reasons for the revision in the rating is the progress in process of merger with Lakshmi Vilas Bank and the potential transition challenges thereof, challenging funding environment for NBFCs and HFCs and moderation in asset quality, company said in a release.

In a statement Lakshmi Vilas Bank said, “The FIR (against the bank) is based on a complaint filed by M/s Religare Finvest Limited (RFL) pertaining to adjustment of their deposits to the dues of M/s RHC Holding Pvt Ltd and M/s Ranchem Pvt Ltd. The same is received at bank’s end on 25 September. The bank is considering appropriate legal measures to counter the same.”

Calling it a “desperate measure” the bank said the mere registration of FIR against the bank does not mean anything at this stage. “The bank is committed to cooperate with the investigating agencies and  regulatory authorities apparently in order to bring out the malicious attempts of RFL to mislead the public to cover up massive fraud indulged by their own promoters, employees, group companies.”