MUMBAI: Some bond investors at Reliance Home Finance are considering multiple options, including a complaint to the regulator of audit firms, to ensure recovery of their outstanding investments after the stressed home financier was taken to the National Company Law Tribunal (NCLT) last week.
Complaints to the National Financial Reporting Authority (NFRA), the regulator of CA firms, are likely to cite failures of Grant Thornton and PwC in spotting irregularities, market sources said. Investors have also demanded a copy of the forensic audit conducted by Grant Thornton. PwC was the statutory auditor of Reliance Home Finance.
Both audit firms did not respond to ET’s queries.
Investors are concerned that unless recovery efforts are stepped up, the remaining funds at the company may be ‘diverted’.
“Remaining funds available also will likely be diverted by RHFL if criminal action is delayed,” an investor said in a letter to the IDBI Trusteeship, which is looking after the interest of bond buyers. “Investors are suffering due to misappropriation of funds, falsification of accounts, cheating etc.”
ET has seen a copy of a letter by investors.
Reliance Home Finance said an independent forensic audit, mandated by lenders, has found no fraud, embezzlement or diversion. It had, prior to the commencement of the forensic audit, disclosed that the outstanding amount of Rs 7,984 crore had almost entirely been utilised by the potential group entities only for making principal repayment and interest to banks, financial institutions, NBFCs and NCD holders.
“As regards your query relating to some allegation by an unnamed investor to NFRA, kindly provide a copy to enable us to provide a response,” the company said in response to ET’s queries. “We are not in receipt of any such copy and are not aware of the same.”
IDBI Trusteeship dragged Reliance Home Finance to NCLT, seeking to recover Rs 3,500 crore of investment after the Reliance CapitalNSE 0.44 % unit missed repayments, ET reported on January 10. It is acting on behalf of about 20,000 bondholders.
IDBI Trusteeship Services filed the application under the Companies Act since doing so doesn’t require the Reserve Bank of India’s permission, a requirement to take a financial services company into administration.
PwC had resigned as the auditor of Reliance Capital and Reliance Home Finance in June. PwC had informed the ministry of corporate affairs (MCA) about certain alleged irregularities in the books of accounts of Reliance Capital and Reliance Home Finance.