*The issue of diversion of funds from the company is not limited to Fortis

*The auditors of promoter group’s Religare Enterprises (“Religare”) have
also qualified its Q3 financial statements for similar issues. As per their
limited review report, “Recently, Company has forwarded inspection reports
from RBI on the financial position of Religare Finvest Ltd as on March 31,
2016 and March 31, 2017, raising various concerns particularly additional
material NPA*
*provisioning (Rs. 798 Crores), diminution in value of investments (Rs. 15
Crores), resultant negative adjustments in net worth, restriction on
expansion  of credit/ investment portfolios, increase in corporate loan
book against RBI directions including some cases of movement of funds
from **intermediary
borrowing companies to group companies of Religare Finvest Ltd
(further corroborated by our review procedures during the year (i.e.
further funds have been given during the year to such intermediary
borrowing companies to the extent of Rs. 525 Crores) besides continuing
weakness of internal control, seeking clarity on roll over of fixed
deposits lying with a*
*Bank. These may have penal consequences from regulators (including RBI)
and would then impact the carrying value of investments of the company in
Religare Finvest Ltd. Considering the above, there are indicators on the
material impairment of carrying value of investments of the company*
*in its subsidiary Religare Finvest Ltd. Extensive review is being

*In addition, the auditors have qualified the statements stating, “The
company is registered as ND-SI-CIC under Section 451A of RBI Act, 1934 and
primarily holding investments in various group companies. Management has
informed us that impairment study is yet to be concluded with respect to
investments held by the company in its major subsidiary, Religare Finvest
*constituting more than 75% (aggregating to Rs. 2900 Crores) of the total
investments as on December 31, 2017.*

*The auditors also state, “Attention is invited to note no.5 (b) of the
standalone unaudited financial results referred to in this report in
relation to put option exercised by non-resident shareholders of Religare
Finvest Ltd on the company (amount involved Rs. 525 Crores approx. as per
Hon’ble Delhi*
*High Court order dated 5th Jan 2018). Pending litigation in the Hon’ble
Delhi High Court, its potential impact due to probable impairment on the
increased shareholding of the Company in Religare Finvest Ltd and cash
outflows of the company is yet to be considered.”*

*These statements by the auditors makes it clear that the modus operandi of
Religare been the same as of Fortis in the matter of movement of funds to
Group companies. Instead of advancing loans themselves, both Religare as
well as Fortis have routed the funds through subsidiaries; Fortis through
Fortis Hospitals Ltd and Religare through Religare Finvest Ltd.*

*This has helped them avoid seeking shareholder approval. Also, Religare
has tried to keep these irregularities under radar by not conducting any
impairment study on Religare Finvest*

Source: InGovern

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