Auditor sounds alarm over Indostar liabilities

The NBFC said its auditor Deloitte Haskins and Sells LLP observed that its total liabilities had exceeded total assets maturing within 12 months by ₹2,206 crore, and for certain borrowing, the gross NPA and net NPA have exceeded thresholds.

“As discussed in Note 12 of the Statement, the total liabilities exceed the total assets maturing within 12 months by ₹220,604 lakh ( ₹2,206 crore), and for certain borrowings, the gross non-performing asset (GNPA) and/or net non-performing asset (NNPA) ratios have exceeded thresholds because of additional impairment allowance recorded during the year. These events or conditions, along with other matters forth in Note 12 of the Statement, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern," Indostar said in its stock exchange filing on Saturday.

On 31 March, the company’s audit committee approved the appointment of Ernst & Young LLP (EY) as an independent external agency for reviewing the policies, procedures and practices relating to the 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 set aside an additional provision of ₹557– 677 crore.

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

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Indostar March quarter loss sharply widened to ₹754 crore from ₹317 crore in the same period last year. Financial results for the June quarter and for the financial year ended March have been delayed due to the audit reviews. In response to the audit committee observations, the management said the company would be able to pay its dues as they fall due and realize its assets in the normal course of business.

“Subsequent to the year-end and till the adoption of these financial results, the company has raised incremental financing of ₹117,000 lakhs from banks and financial institutions based on support from the promoters of the company. As of 31 March 2022, the company is in compliance with the required capital adequacy ratios and has cash and cash equivalents, aggregating ₹7,180 lakh ( ₹71.8 crore), liquid investments aggregating ₹29,403 lakh ( ₹294 crore), and has a pool of loan assets eligible for securitization in the event lenders recall the borrowing arrangements. As on the date of adoption of these financial results, none of the lenders has recalled borrowings," the company said.

Further, the management may also raise additional financing by monetizing a part of its holding in its unit IndoStar Home Finance Pvt. Ltd after board approvals, it added.

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