Paras Kuhad, former solicitor general of india, has alleged that Edelweiss Group, the controlling shareholder of the asset reconstruction company along with its partner Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), diverted at least Rs1,800 crore
MUMBAI: Shares of Edelweiss Financial Services fell 5% after a report said the Ministry of Corporate Affairs (MCA) has begun an investigating into the allegations of financial irregularities in the asset reconstruction arm of Edelweiss Financial Services Ltd.
According to the news website Moneycontrol, the MCA has ordered inspection into the company’s books of accounts, following a whistleblower complaint to the Prime Minister’s Office and Reserve Bank of India.
Paras Kuhad, former solicitor general of india, has alleged that Edelweiss Group, the controlling shareholder of the asset reconstruction company along with its partner Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), diverted at least Rs1,800 crore. Kuhad and his family own about 14% in EARC, which manages ₹45,000 crore in assets, according to the report.
Mint could not independently verify the contents of the letter.
In a notice to the stock exchanges, Edelweiss ARC has clarified that it has not received any intimation of any inspection being conducted by the MCA. "We deny each and every allegation, contention, statement and/or assertion against us, as contained in the article. EARC is in full compliance with the applicable laws, and has been conducting its business and operations in a fair and transparent manner. We have always acted responsibly and discharged our fiduciary responsibilities, and these allegations seem to be motivated," it said.
Kuhad has alleged that Edelweiss diverted money from the ARC in four ways. In November 2019, it took a Rs1,250 crore loan from Farallon Capital, an American investment firm, at a rate of 17% to help its parent company through a liquidity crunch. The letter has alleged that it used Rs700 crore from the Farallon loan to pay back a loan taken from Edelweiss Group at 14%, one which was not due to be repaid at that time.
The letter has also alleged that EARC exclusively sold certain non-convertible debentures (NCDs) to Edelweiss Group and CDPQ, whose terms were loaded in favour of the latter entities. It also stated state that Edelweiss Group allotted 20 percent equity shares in EARC to CDPQ for less than the fair value, according to the report.