Weekly Moneylife Indices & Sector Trends
The Sensex and the NIFTY gained 1% during the period 24 May 2019 to 30 May 2019. ML Mid-cap Index and ML Small-cap Index advanced 3% each. ML Large-cap Index and ML Micro-cap Index rose 1% each. ML Mega-cap Index ended flat.
Foreigners: Foreign institutional investors were net buyers of equities during the week (Rs2,074.72 crore)....
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  • SFIO Files Charge Sheet against IFIN; Names Auditors, Directors, Key Employees and Companies
    The Serious Frauds Investigation Office (SFIO) filed its first charge sheet against IL&FS Financial Services, one of the two major companies of IL&FS (Infrastructure Leasing & Financial Services), the 347-company conglomerate that is in serious financial trouble. 
    The criminal complaint (20 of 2019) filed before the additional special judge in Mumbai has cast the net wide with 30 respondents who include the entire board of IFIN led by Ravi Parthasarathy and all the audit firms and their key partners and C Sivasankaran, the industrialist whose loans pop-up in various disputes with the Tatas and others. 
    The charge sheet alleges that C Sivasankaran was given loans without adequate collateral and when they went bad, senior management connived with him to cause a wrongful loss to the company. Siva group founder C Sivasankaran was a close friend of Ravi Parthasarathy and Hari Shankaran—the chairman and vice chairman of IL&FS respectively, says the charge sheet. 
    SFIO also accuses the auditors, BSR & Co LLP,  Deloitte Haskins & Sells (DHS) LLP and others of helping to conceal information and falsify accounts. It documents the modus operandi exposed by the Grant Thornton forensic audit of repeated round-tripping funds through a host of other companies to pretend repayment and show the accounts as being standard. It names Parsvanath Group, A2Z and ABG as companies where similar dubious practices were followed. These too have been examined in detail by Grant Thornton’s Icarus report. 
    Apart from failure to disclose information or follow Reserve Bank of India (RBI) guidelines, it accuses Ramesh Bawa specifically of failing to disclose his interest in AAA Infosystems and AAAB Infrastructure Pvt. Ltd., in which his wife and daughter are directors. 
    SFIO also accuses IFIN of devising an illegal strategy to lend money to IL&FS group companies in violation of RBI’s concentration rules. IL&FS Transportation Network, the large listed company in the IL&FS group, was allegedly one of the primary beneficiaries. 
    The charge sheet accuses independent directors of being mute spectators and failing to raise appropriate governance issues at board meetings. Here is the charge sheet.

    The charge sheet says that a coterie of persons led by Ravi Parthasarathy and comprising Hari Shankaran, Arun K Saha, Vibhav Kapoor, K Ramchand, Ramesh C Bawa “were controlling the affairs and decision making in the IL&FS group as well as IFIN”.

    It also says that the independent directors knew the actions of this coterie in hiding bad loans and stressed assets or lending to companies that were already under corporate debt restructuring.

    Apart from outlining how various RBI norms and rules were breached to hide the poor financials of IL&FS group companies, the rosy picture they presented allowed the group to announce hefty dividends and this also formed the basis of the remuneration earned by senior management.

    With regard to the relationship with C Sivasankaran, the charge sheet says that he organised hospitality for Ravi Parthasarathy,  Hari Shankaran and Vibhav Kapoor, including “arranging foreign travel, private jets, helicopter rides, booking of resorts and arranging the interiors of their flats at Brussels” among other things. In return, they had connived to lend to the Siva group.

    Interestingly, it says that the loans to Sivasankaran were against the shares of Tata Teleservices Ltd (which figure prominently in the dispute between the Tatas and Cyrus Mistry, the group’s former chairman who was shamefully ousted).  These shares were held at a fixed valuation of Rs82, long after the market value had dwindled until the Reserve Bank of India (RBI) in its report said that the value of the shares should be treated as NIL and provided for.

    Another shocking disclosure is how IFIN lent to the Siva group against Emerald Stones valued at Rs 59.62 crore, however this was done “without any physical examination, documentation related to value, verification of ownership, verification of premises where they were kept” etc., it was done by relying only on a chartered accountant’s letter.

    Later, IFIN also subscribed to 0.001% unsecured, optionally convertible debentures of Siva Green, a group company to the tune of Rs 190 crore for five years. This was virtually an interest free loan to the group. New loans to the Siva group were given to facilitate repayment of old loans and the security against which loans were extended was non-existent, since the Tata Teleservices shares had no market value. Para 54 of the charge sheet says that IL&FS did not write off the Tata Teleservices shares and debentures to Siva Green despite being directed to do so in the RBI inspection.

    SFIO refers to these as fraudulent transactions whose ultimate aim was also to present a rosy picture and defraud the lenders of IFIN. Para 36 and 37 of the charge sheet says that IFIN along with Ravi Parthasarathy and Hari Shankaran (the two persons on whom Sivasankaran allegedly had great influence) entered into a series of transactions to bailout and benefit Sivasankaran and his companies in a variety of transactions, including a loan of Rs175 crore.

    A shocking charge is that IFIL lent Rs 125 crore to the beleaguered Unitech Group, which was already in financial distress, only for the Unitech to repay its dues of around Rs 80 crore to Sivasankaran. According to the charge sheet statements of IFIN employees reveal that Sivasankaran dictated terms at IL&FS and worked through Ravi Parthasarathy and Hari Shankaran.

    Auditors and directors are accused of having failed to perform their statutory duties, conniving or turning a blind eye to the problem of stressed assets.

    Many other charges by the SFIO have been documented in the Project Icarus and reported in detail earlier.

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    Modi 2.0: Old and New Faces Greet Economic Ministries
    Keeping his reputation of surprising people with unexpected steps intact, Prime Minister Narendra Modi selected Nirmala Sitharaman as the Finance Minister.
    The Defence Minister in the last NDA government, from 2017, Sitaraman made it to the North Block against all the speculations doing the rounds either Amit Shah or Piyush Goyal leading the Indian economy. She will also head the Corporate Affairs Ministry in the new government.
    A member of Rajya Sabha from Karnataka, the next big task at her hand is to present the Union Budget, which is likely in the first half of July.
    Piyush Goyal, who was widely expected to get the Finance portfolio, will be the Commerce Minister of the country along with additional charge of the Railway Ministry. Goyal succeeds Suresh Prabhu in the Commerce Ministry. 
    Prabhu was dropped from PM Modi's new cabinet along with several other ministers who were present in the last ministry. Another key economic portfolio, Petroleum and Natural Gas has been retained by Dharmendra Pradhan who helmed the ministry during 2014-19. Pradhan will also be the Minister of Steel in the new government. 
    Ravi Shankar Prasad will be the Communications Minister, which includes the Telecommunications Department and the Department of Post. He will also continue to hold the Law and IT Ministry in the new cabinet.
    Nitin Gadkari will continue to be the Road Transport and Highways Minister while also handling the Micro, Small and Medium Enterprises Ministry.
    The Heavy Industries and Public Enterprise Ministry has gone to Shiv Sena's Arvind Ganpat Sawant. Lok Janashakti Party chief Ram Vilas Paswan will continue with the Consumer Affairs, Food and Public Distribution Ministry.
    Smriti Irani, R.K. Singh and Shiromani Akali Dal's Harsimrat Kaur Badal will continue with Textiles, Power and New and Renewable Energy and Food Processing Ministries respectively. Irani, who turned out to be a giant slayer this election by defeating Congress President Rahul Gandhi in Amethi, will also hold the Women and Child Development Ministry. 
    While, Kaur and Irani are in the Union Cabinet, Singh will be a Minister of State with Independent charge. The bureaucrat-turned-politician will also hold the portfolio of Skill Development and Entrepreneurship. Hardeep Singh Puri, will take over as the Civil Aviation Minister along with continuing in the Housing and Urban Affairs Ministry.
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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