Mahindra Finance Detects Rs 150 Crore Fraud, Postpones Financial Results

Mahindra Finance disclosed on Tuesday that it uncovered a fraud amounting to approximately Rs 150 crore within its loan portfolio in March, leading to a delay in the announcement of its financial results for the fourth quarter and the fiscal year. The revelation came as the company's board convened to discuss various strategic decisions, including an increase in the borrowing limit and changes in statutory and secretarial auditors.

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The board of Mahindra & Mahindra Financial Services, during its meeting, resolved to enhance the company's borrowing limit from Rs 1.10 lakh crore to Rs 1.30 lakh crore. Additionally, it was decided that M M Nissim & Co LLP and M P Chitale & Co would take over as the Joint Statutory Auditors for a three-year tenure, succeeding Deloitte Haskins & Sells and Mukund M. Chitale & Co after their term concludes at the upcoming 34th annual general meeting (AGM).

The financial services giant was poised to approve its financial outcomes for the March quarter and the 2023-24 fiscal year on Tuesday. However, following the fraud detection, it has postponed this approval, with a new date for the board meeting to be announced later.

The fraud, detected at one of Mahindra Finance's branches in the northeast towards the end of the fourth quarter of the financial year ending March 31, 2024, involved forgery of Know Your Customer (KYC) documents related to retail vehicle loans, leading to misappropriation of funds. The company is currently conducting an advanced-stage investigation into this incident and has stated that the financial impact is not expected to surpass Rs 150 crore.

As part of its response to this fraudulent activity, Mahindra Finance has initiated several corrective measures. These include the arrest of individuals implicated in the fraud. The company is committed to ensuring such incidents are thoroughly addressed and prevented in the future.

In another significant move by the board, Vijay Kumar Sharma has been appointed as an Additional Director (independent and non-executive) for a five-year term starting from May 15, 2024. Furthermore, KSR & Co Company Secretaries LLP will replace Makarand M. Joshi & Co. Company Secretaries as the Secretarial Auditor for FY25 and FY26.

This series of decisions comes at a time when Mahindra Finance's shares experienced a downturn, closing 5.47 per cent lower at Rs 263.60 each on the BSE. The company's proactive stance on addressing the fraud and making strategic appointments reflects its commitment to maintaining robust governance and financial health.