Mahindra Finance Detects Rs 150 Crore Fraud, Postpones FY24 Financial Results

Mahindra Finance disclosed on Tuesday a significant financial discrepancy within its operations, revealing a fraud amounting to approximately Rs 150 crore in its loan portfolio at one of its branches. This discovery has led to the postponement of the company's financial results for the fourth quarter and the fiscal year 2023-24 until May 30. The announcement came just as the Mahindra & Mahindra Financial Services board was poised to finalize the financial outcomes for the March quarter and the entire fiscal year.

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In light of these developments, the board meeting initially scheduled to deliberate on financial statements, results, and potential dividends for the period ending March 2024 has been deferred. Furthermore, during a recent meeting, the board sanctioned an increase in the borrowing limit from Rs 1.10 lakh crore to Rs 1.30 lakh crore. It also resolved to appoint M M Nissim & Co LLP and M P Chitale & Co as 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 fraud, detected towards the end of the fourth quarter of FY 2023-24, primarily involved the forgery of Know Your Customer (KYC) documents related to retail vehicle loans, leading to misappropriation of funds. Mahindra Finance is currently conducting thorough investigations into this matter, which are in advanced stages. Despite this setback, the company has assured that the financial impact is not expected to surpass Rs 150 crore.

Efforts to rectify the situation are underway, with several corrective measures being implemented. These include legal actions against individuals implicated in the fraud. Additionally, Mahindra Finance has announced significant appointments within its board. Vijay Kumar Sharma has been named an Additional Director (independent and non-executive) for a five-year term starting from May 15, 2024. Moreover, KSR & Co Company Secretaries LLP will take over as the Secretarial Auditor for FY25 and FY26, replacing Makarand M. Joshi & Co.

The revelation of this fraud has impacted investor sentiment towards Mahindra Finance, as evidenced by a 5.47 per cent decline in its share price, closing at Rs 263.60 on the Bombay Stock Exchange (BSE). This incident underscores the challenges financial institutions face in maintaining integrity within their operations and highlights the importance of robust internal controls and oversight mechanisms.