In a startling revelation coming to light on Tuesday, Mahindra Finance announced the detection of approximately Rs 150 crore worth of fraud within its loan portfolio. This discovery, made towards the close of the financial year ending March 31, 2024, has led to the deferral of the organization’s financial results for both the last quarter and the entire fiscal year.
The Board of Mahindra & Mahindra Financial Services, gathered for a routine meeting earlier that day, not only uncovered this fraudulent activity but also took strategic steps to strengthen the company’s financial infrastructure. Among the key decisions was the resolution to hike the company’s borrowing limit by a significant margin, going up from the current Rs 1.10 lakh crore to a new threshold of Rs 1.30 lakh crore.
Additionally, marking a transition in its statutory oversight, the company’s board addressed the tenure completion of its current Joint Statutory auditors – Deloitte Haskins & Sells, along with Mukund M. Chitale & Co. After completing their 3-year term, the incumbents will make way for successors, M M Nissim & Co LLP and M P Chitale & Co, at the forthcoming 34th annual general meeting (AGM), set to convene later in the year.
This meeting of the board, slated for Tuesday, had a crucial agenda item: to approve the financial figures for the recent March quarter as well as the entire fiscal year of 2023-24. However, with the unanticipated detection of the fraudulent activity, Mahindra Finance conveyed through a regulatory filing that the board meeting specifically purposed for the approval of these results would be scheduled for a later date, yet to be determined.
The origin of the fraud traces back to a single northeastern branch, where an embezzlement of company funds was conducted through the forgery of Know Your Customer (KYC) documents specifically tied to retail vehicle loans. The involved investigations are reportedly at an advanced stage, with Mahindra Finance estimating that the financial impact triggered by the fraud is not expected to exceed the Rs 150 crore mark.
Efforts to resolve this issue include the implementation of crucial corrective measures and, as the company revealed, the apprehension of several individuals implicated in the fraudulent operation. Initiative and vigilance are evident in the immediate responses by Mahindra Finance’s management to mitigate the effects and prevent recurrences of such fraudulent activities.
Amid these challenges, the board also made substantial administrative appointments, highlighting their commitment to robust governance. Vijay Kumar Sharma has been welcomed as an Additional Director (independent and non-executive) on the board, commencing his tenure from May 15, 2024, for a full five-year term.
Furthermore, the company is set to collaborate with KSR & Co Company Secretaries LLP as the new Secretarial Auditor for the fiscal years FY25 and FY26, stepping in for the present auditor Makarand M. Joshi & Co. Company Secretaries. This move signifies a refreshed audit perspective aligning with the company’s current and future goals.
All this comes at a time when the financial services giant found its shares dipping by 5.47 percent, culminating in a closing price of Rs 263.60 per unit on the Bombay Stock Exchange (BSE). Investors and market watchers alike will keenly observe how Mahindra Finance navigates out of these troubled waters and what measures it puts in place to secure its financial framework, restore shareholder confidence, and safeguard against such significant fraudulent occurrences in the future.
