Grant Thornton was provided with forensic audit of the Whole IL&FS sage, to which they have issued a report. The copy of draft reported was made public by moneycontrol at their website. (Refer link below)

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The 105-page report by grant thornton goes on to describe several potential strategies that were undertaken by KMPs of IL&FS to pressure CRAs into giving good ratings or avoid a downgrade to which apparently the CRA’s surrendered.

Excerpts from the report:

– We noted that the credit rating rationale which is supposed to be drafted by the rating agencies were materially modified by or significant suggestions from the former key employees of IL&FS were incorporated, to provide and support good ratings given by the CRAs;
– We noted that in case if the then key employees of IL&FS became aware that ratings are not going to be favorable, they then either delay the process of rating surveillance or delay the publication of the rating on the public domain.
– We noted in certain instances that intentionally incorrect or incomplete information was being provided to the Credit Rating Agencies to avoid rating downgrade;
– We noted instances where in case if the then key employees of IL&FS did not receive the desired rating from the CRA they used to potentially pressurize rating agencies to either withdraw the credit ratings or credit rating request or approach other rating agencies who would provide the desired ratings;
– We noted instances where if the ratings are not favorable, the then key employees of IL&FS tend to keep the ratings in private domain;

– We noted instances where after meeting with the then key employees of IL&FS, CRA would not downgrade the ratings which it initial decided;

If the credit rating agencies lose credibility, this is a serious problem in investment story of India. Not just the auditors but even CRA’s bear the equal blame.

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