Inter-company deposit anomalies, lack of transparency at DHFL: Deloitte

MUMBAI: Deloitte Haskins & Sells, an affiliate firm of Deloitte India, which resigned as auditor of the cash-strapped DHFL on Monday, alleged lack of transparency and significant deficiencies in the grant and rollover of inter-company deposits (ICDs) at the last board meeting of the housing finance company.

Sources told ET that Deloitte may have cited this as reason for resigning. DHFL has still not informed the BSE about the resignation, but is required to do so upon receiving Deloitte’s letter.

The auditor wrote to the DHFL directors, “There are significant deficiencies in the grant and rollover of ICD, inter-alia, non-availability of evaluation of credit worthiness of the borrowers, commercial rationale forming basis of granting of the ICD. The note also states that the company is working towards remediating these deficiencies and that no adjustment is required to the carrying value thereof. We have not been provided sufficient appropriate audit evidence to support the management’s assessment and, hence, are unable to evaluate on recoverability of ICD and the consequential effect on the (financial) statement.”

DHFL submitted this letter to BSE on July 22.

Chaturvedi & Shah are joint auditors of DHFL and will continue in their role, albeit as sole auditors.

A DHFL spokesperson told ET, “The management, on unaudited financial results announced on July 13... clearly explained various aspects related to the financial position of the company. Notes clearly mentioned certain deficiencies and steps the company has taken to resolve them... Audited results and the notes to accounts released on July 22 observed the same points of deficiencies. So, to mention that the management has not been transparent is incorrect.”

“We have not received sufficient information and explanations to enquiries,” Deloitte stated in its note to the DHFL board, “on credit, legal and technical evaluation, and evidence for end-use monitoring as stated in the loan agreement and specified by the Finance Committee, wherever applicable, for project and mortgage loans aggregating Rs 24,07,772 lakh (includes loans aggregating Rs 13,11,283 lakh.”

The auditor had sent its resignation to DHFL last week, but this was delivered only on Monday, said a person close to the development. ET could not verify this from DHFL.

DHFL stock fell 10.08% on Monday to close at Rs 41.95 on the BSE, after receiving news of Deloitte’s resignation.