According to sources, the forensic report was sent to CARE Ratings on Wednesday night and it could have been instrumental in sending the rating agency’s CEO and MD Rajesh Mokashi on “leave”.
Infrastructure Leasing and Financial Services (IL&FS) has completed the first phase of the forensic audit which has evaluated the role of its credit rating agencies (CRAs) in rating various debt instruments that helped excessive borrowings that eventually led to defaults. The report prepared by Grant Thornton has been shared with relevant stakeholders, sector experts and legal teams for their opinion, IL&FS said in a statement.
According to sources, the forensic report was sent to CARE Ratings on Wednesday night and it could have been instrumental in sending the rating agency’s CEO and MD Rajesh Mokashi on “leave”. CARE on Wednesday announced it has asked Mokashi to go on leave pending completion of complaint received by the Securities and Exchange Board of India (Sebi). The rating agency has appointed executive director TN Arun Kumar as an interim CEO.
Earlier on July 2, ratings agency, Icra sent its head Naresh Takkar on leave. Icra also took the action against Takkar after concerns were raised by the Sebi following an anonymous complaint.
According to reports, the complaint was about interference by the rating firm’s top executives in assigning top investment-grade ratings to IL&FS and its subsidiaries last year. Although the details of the forensic report are awaited, it is believed to pin the wrongdoings in rating IL&FS Group companies during the review period of 2008 to 2018.
“The report has analysed several email communications between the erstwhile management and the representatives of credit rating agencies during the specified period. CARE, Icra, India Ratings and Brickwork have been the main rating agencies for ITNL, IFIN and IL&FS. Brickwork was introduced in ITNL and IFIN from 2016, replacing Crisil, during this period under review,” the statement issued by IL&FS said.
Sebi has been conducting an in-depth investigation into the role of several entities and individuals, including for suspected violation of disclosure and corporate governance norms. The Sebi probe had begun soon after the crisis came to light at IL&FS group last year, following huge defaults by various entities which together had a debt burden of over Rs 90,000 crore, a report said.
Investigations into the company by authorities have also found that several entities from the IL&FS group continued to enjoy high ratings from various rating agencies, including due to window-dressing of the books of the companies and ever-greening of their loans. As per the probe, a number of borrowers, including listed firms, were not servicing their debt obligation timely.