Sambandh Finserv Defaults in Payment due to Liquidity Issues; Loan Fraud by MD & CEO, Alleges CFO
Moneylife Digital Team 15 October 2020
Odisha-based Sambandh Finserve Pvt Ltd has defaulted in its payment obligations arising due to internal fraud unearthed at the end of September 2020. In a note to the board of directors, four officials, including its chief financial officer (CFO) James Raj, has levelled serious allegations against the company's founder, Deepak Kindo, who is also managing director (MD) and chief executive officer (CEO) of Sambandh Finserve. They allege that assets under management (AUM) have been inflated by a whopping Rs250 crore by showing fictitious disbursement, withdrawals and showing deposits as collections.   
A note prepared by CFO James Raj, and three others, for the board, reveals that there were serious irregularities in the functioning of the management.
"The actual portfolio as (AUM) is around Rs140 crore as against reported figure of Rs391 crore as on 30 September 2020. The reported AUM is inflated and non-existent. The gap is about Rs251 crore," it says. 
The note also alleges that "this gap in the portfolio was managed by fictitious disbursement, subsequent withdrawals and deposited as fictitious collections under the direction of MD and CEO saying it would be managed soon and it goes on. This has been going on since the financial year 2015-16 and the gap has simultaneously gone up beyond control."
According to the note, "there is pilferage in the cash withdrawn for disbursement by the MD and CEO and diverted to other entities namely Diya Dairy & Agroprocessors Pvt Ltd, Kshamta Foundation, Regional Rural Development Centre, DK Enterprises, Utkal Dairy and other unknown persons or entities."
All this was done under the instructions of the MD and CEO, it is alleged. The note claims that these instructions were followed and executed 'under extreme duress and intimidation' in the belief that it would be 'managed soon'.  
The note goes on to blame several other executives without naming them, but says that the “fake portfolio on the ground was managed by the current COO and the regional business leader” responsible for Orissa and Chhattisgarh. 
The note has several general allegations and asks the board to initiate further investigation and take action for safeguarding the interests of all stakeholders and the safety of those who have blown the whistle on the fraud. (check the note at the end of this article.)
Meanwhile, Brickwork Ratings (BWR) has downgraded the long-term rating of Sambandh Finserve's non-convertible debentures (NCDs) and bank loan facilities to BWR D from BWR BBB- with positive outlook.
In a release, BWR says it downgraded Sambandh Finserve's ratings as per the feedback received from one of its lenders on 10 October 2020. However, when BWR called the company officials, it was informed by James Dinesh Raj, chief financial officer (CFO) of Sambandh Finserve, about the internal fraud where large quantum of bogus loans entries was made in the book of accounts of the company. 
"This also resulted in the company facing sudden liquidity issues since the first week of October 2020. The CFO informed BWR that they have timely met all repayment obligations on time till the month of September 2020. He also informed BWR that an internal investigation is being initiated by the board of the company with regards to the loan fraud unearthed," the note says.
Sambandh Finserve has two NCDs worth Rs50 crore and one fund-based term loan of Rs383 crore, taking the total of its debt instruments to Rs433 crore. As on FY19-20, the company has asset under management (AUM) worth Rs461.38 crore.
In June this year, Opportunity International Australia's subsidiary Dia Vikas Capital Pvt Ltd invested Rs2.5 crore in Sambandh Finserve.  
In 2013, Sambandh Finserve got registered with the Reserve Bank of India (RBI) as a non-banking finance company – micro finance institution (NBFC-MFI). Before that, it was working as NBFC and MFI since 2006. In FY19-20 the company started its operations in Bihar and Gujarat through 34 new branches and has an active customer base of 0.22 million.
It offers customised lending and financing solutions to low-income households and to those having little access to formal financial avenues, who use the credit to run small businesses, renovate their dwelling units and educate their children.
Sambandh Finserve has presence in the five states of Odisha, Chhattisgarh, Jharkhand, Bihar and Gujarat and offers personalised credit and wealth management solutions to its clients.
Here is the note prepared by four officials of Sambandh Finserve…
2 years ago
It is like rapists, killers, extortionist become minister so the promoters, their kins lateral and direct join top posts and award them selves designation . if it was US all would have been behind bars, here political parties will rush to offer savior service in return for grease on the palms every one happy
2 years ago
What sort of rating institutions we have? Do they need a whistle blower to point out corruption by none other than MD? This fraud must be in existence even before the earlier rating by the BRICKS. One of the most important things to be done in the financial reforms is correcting the rating agencies by building a code for all of them to work and transparently too.
Replied to yerramr comment 2 years ago
What could rating agencies do in this case? They are not forensic auditors. Even a FPI got burnt...
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