The blatant window dressing of financial statements, has been the key feature of India’s NPA crisis, which defies resolution. As part of this dubious scheme of things, the most ineligible borrowers were made eligible, by cooking up their financial statements, which on paper showed these unworthy borrowers to be financially healthy and strong, with profitable operations, which actually was not so. In this fraudulent modus operandi, the balance sheets of the lender, as well as the borrower were manipulated, with the help of colluding auditors and others.
The financial statements were falsified in this manner for many years, such that one of the biggest problems now plaguing the Indian banking system and the economy too, is that due to the concealment of the real state of affairs through these fraudulent statements and the rotation of funds through a complex web of subsidiaries and related parties, the true financial position of many corporates is just not known. What was shown on paper for public consumption was a rosy financial picture and the sordid reality emerged only when these debt loaded entities went bust. The world never knew that through its web of over 350 subsidiaries, wherein funds were fraudulently rotated, the AAA rated ILFS, with a negative networth had borrowed over Rs.132000 crores. Or take the case of the crash landed Jet Airways, where the bank debt is claimed to be Rs.8000 crores, but the real debt of the airline, as per the employees union is about USD 3bn ie. Rs.21000 crores. Or take the case of the swindler Sterling Biotech Group, whose debt was said to be Rs.6500 crores so far, but it now turns out to be to the tune of Rs.15500 crores. And such a story of hidden loans and hidden losses does not just apply to corporates, but to banks too, including the likes of ICICI Bank, Axis Bank, Yes Bank, etc. who hid their losses, manipulated their networth and over borrowed for years, till the RBI cracked the whip and compelled them to come clean, which they are fully yet to do so. And that applies to companies like Manpasand Beverages too, which have reported bogus turnover and profits, through an unreported network of related parties. These unknown hidden liabilities of corporates which get revealed only when a company goes bust, has also been one of the reasons why the NCLT has been unable to resolve NPA cases.
It is with this background, that one would examine the recent claims of Mr. Anil Ambani, that his companies have repaid Rs.35000 crores of loans, of which he says that Rs.25000 cr. is principal repaid and Rs.10000 cr. is towards interest. He says that his group is fully committed to repay its entire debt in a timely manner, through further asset monetisation. It is obvious that this statement has been made by him to quell the growing anxiety of lenders and investors, in view of the mounting debt of his group. It however failed to allay their fears. That’s because while Anil Ambani claims to have repaid Rs.35000 cr., he gives no details whatsoever of paid how, when and to whom. Even the bankers to his companies are flummoxed by this claim and are asking for the details of such alleged payments made, whose maths is just not adding up. Such payments are made through bank accounts and if the bankers cannot certify such repayment claims, then this statement of Mr. Ambani is a questionable one. The dismayed bankers have not forgotten his earlier reassurances regarding payment of bank loans of Rs.50000 cr. of RCom, which were finally not paid, leaving them high and dry.
But this malady of making false claims and giving doubtful figures is not restricted to the corporate/banking sector only. Even the government is known to do so, as in the case of the official rosy GDP growth rate figures, unemployment statistics etc. which do not match with the ground realities and are now being challenged by Mr. Arvind Subramanian, India’s former CEA himself. The likes of Mr.Ambani need to explain not just his claim of loan payment of Rs.35000 crores made by his companies, but also as to how he will make timely repayment of loans, which he now promises.