In a recent disclosure on April 23, Mahindra & Mahindra Financial Services made a startling revelation about fraudulent activities within the company. The financial institution discovered improper financial maneuvers involving approximately ₹150 crore in fraudulent loans originating from one of its branches in the northeastern part of the country. This revelation comes just before their scheduled meeting on Tuesday, which was intended for the board to approve financial results for the last quarter ending March 2023 and the fiscal year 2023-24. However, following this incident, Mahindra Finance has decided to delay the announcement of its financial results and the declaration of dividends, now rescheduled for May 30, 2024.
This unfortunate discovery has prompted the company to take immediate and stringent measures. They conducted an in-depth investigation into the malpractices, which identified a fraudulent scheme hinging on the forgery of KYC documents used to embezzle funds from retail vehicle loans. The company stated that though investigations are in an advanced stage, they estimate the financial impact of this misconduct to not exceed the mentioned figure of ₹150 crore. Mahindra Finance reassured that they are taking corrective actions to address the situation, which has already led to the arrest of several individuals involved in the scheme.
Simultaneous to handling the fraud situation, the Mahindra Finance board, in their prior meeting, approved an increase in their borrowing limit from the current ₹1.10 lakh crore to ₹1.30 lakh crore. This move indicates proactive steps towards enhancing the company’s financial capabilities and addressing future growth objectives.
Furthermore, the finance company’s management also decided on significant changes in their auditing partners. M M Nissim & Co LLP and M P Chitale & Co have been appointed as the new Joint Statutory auditors for a term of three years. They will be taking over the responsibilities from the incumbent auditors, Deloitte Haskins & Sells and Mukund M. Chitale & Co, assigning them the critical task of validating the company’s financial health following the incoming 34th annual general meeting later in the year.
Additionally, the board endorsed the appointment of Vijay Kumar Sharma as an Additional Director in a non-executive and independent role, setting his term of service for five years commencing mid-May 2024. This move likely aims to augment the company’s governance with fresh, strategic insights.
In furtherance of corporate compliance and good governance practices, the board has also appointed KSR & Co Company Secretaries LLP as the Secretarial Auditor for the financial years 2025 and 2026, taking over from the current auditors, Makarand M. Joshi & Co. Company Secretaries.
The market responded to these series of news releases with apprehension, which was reflected in Mahindra Finance’s shares closing 5.47% lower, at ₹263.60 on the Bombay Stock Exchange (BSE).
Despite the setback, Mahindra Finance seems determined to bounce back, with the fraud detection showcasing a vigilant approach to risk management within the organisation. This careful stewardship is particularly significant in the volatile automobile financing sector where consumer trust is crucial for maintaining market position and ensuring sustained growth. The subsequent adjustments and reshuffling of auditors and company officials depict a clear intent to reinforce the company’s commitment to transparency and integrity as it maneuvers through the challenges ahead.
