A forensic audit of IL&FS Tamil Nadu Power Company Ltd (ITPCL) has flagged its 2012 equity stake sale to a Singapore firm, AS Coal Resource Pte Limited, controlled by Jaimin Vyas, a British national.
The audit report, prepared by Grant Thornton, has raised concerns over the transaction underlying the sale of ITPCL stake to AS Coal Resource as it has found that SEPCO Electric Power Construction Corporation, a Chinese construction and engineering company, allegedly provided financial assistance of about Rs 800 crore to entities associated with Vyas, for acquisition of ITPCL shares.
The audit report, submitted to a consortium of lenders led by Punjab National Bank in June 2020, has found that SEPCO was one of the contractors of ITPCL and it had received money from the power firm for various contracts.
ITPCL operates a 1,200-MW imported coal-based plant in Cuddalore. Around Rs 10,600 crore was invested in the project, of which public sector banks have given loans of Rs 6,080 crore and IL&FS Energy Development Company Ltd (IEDCL), a subsidiary of IL&FS, has put in Rs 4,560 crore.
ITPCL, which is undergoing insolvency proceedings, owes over Rs 6,700 crore to banks and about Rs 900 crore to IL&FS entities. At present, AS Coal Resource has 8.6 per cent stake in ITPCL and IEDCL holds the remaining 91.4 per cent.
Former petroleum and natural gas secretary MS Srinivasan was the chairman of ITPCL when AS Coal Resource bought the stake in ITPCL. “I have no comments. I left the company one-and-a-half-years ago,” Srinivasan told The Indian Express over the phone. Srinivasan, who joined the company in 2008, stepped down from his post at ITPCL in November 2018.
Emails sent to AS Coal and SEPCO Electric Power Construction Corporation did not elicit any response.
The new board of IL&FS has termed the transactions reported in the forensic audit as “objectionable” and has referred the issue to the Reserve Bank of India (RBI) and the investigating agencies probing into the collapse of IL&FS.
“Some objectionable transactions were there, which have been flagged to the relevant investigating agencies and the RBI also. Some of them are in the nature of increase in cost of the project etc. We have no means of confirming it. Investigating agencies are doing it. We have shared the forensic audit report with them and we hope that restructuring of ITPCL or sale of stake in some of the foreign entities which are taking place and have seen such kind of transactions will take place without getting adversely affected by these transactions. We are cooperating with the investigating agencies,” said Bijay Kumar, deputy managing director of IL&FS, on Monday in response to The Indian Express query.
Sources said the Enforcement Directorate (ED) has issued a lookout circular against Jaimin Vyas, and also sent a letter rogatory (LR) to Singapore seeking information on AS Coal Resource and entities related to it.
Apart from this, the forensic audit has also flagged alleged irregularities in the pricing and acquisition of land for ITPCL’s Cuddalore plant through the aide of a DMK politician. The audit has also raised concerns over ITPCL’s acquisition of an Indonesian coal mine domiciled under IL&FS Maritime Offshore Pte Limited, as a part of the power plant’s backward integration.
Earlier this year, the new IL&FS board had put up ITPCL’s assets for sale but it did not find any buyers. Now, IL&FS is hoping to complete the restructuring of the loans of ITPCL by September, subject to receivables from Tamil Nadu Generation and Distribution Corporation. ITPCL was taken for insolvency proceedings by State Bank of India and other public sector banks in September 2018 on technical reasons as the lenders expected the company to default on its dues.
Financial irregularities at IL&FS came to light in September 2018, after some group entities started defaulting on debt repayments. The entire group has been defaulting on repayments since then. The government subsequently superseded the company’s board, and appointed a new management to work on a resolution plan. IL&FS has also come under the scanner of the ED and the Serious Fraud Investigation Office (SFIO). The SFIO found several irregularities across corporate governance and financial parameters that led to a default crisis at IL&FS. It also arrested Hari Sankaran and Ramesh Bawa of the IL&FS Group in connection with the case. Both of them are in judicial custody.
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