The Enforcement Directorate (ED) on June 8 carried out searches at five locations of travel firm Cox & Kings in Mumbai in connection with the Yes Bank money laundering case. The raids are aimed at finding proof of dealings between Yes Bank co-founder Rana Kapoor and Cox & Kings, sources said.
The teams of the central agency carried out the searches under the Prevention of Money Laundering Act (PMLA). Yes Bank has more than Rs 2,270 crore of loan exposure to Cox & Kings.
It is the first raid by central agencies in the Yes Bank case after the easing of the nationwide coronavirus lockdown.
A forensic audit by PricewaterhouseCoopers (PwC) has recently unearthed a maze of transactions that question corporate governance practices at Cox and Kings Limited (CKL), the bankrupt travel firm, and financial irregularities involving its key management personnel.
Moneycontrol has seen a copy of the audit report.
While Cox & Kings Financial Services Limited required a working loan of Rs 50 crore, Yes Bank had given a working capital limit of Rs 350 crore, the audit report says.
Separately, CKL also borrowed Rs 3,642 crore from Yes Bank in the name of various companies.
A source privy to the matter told Moneycontrol: "There is suspicion that CKL has siphoned off money abroad and domestically through multi-layered transactions".
As per the resolution plan submitted by financial creditors to the National Company Law Tribunal, the group has taken a total loan of Rs 5,500 crore. Other major lenders are Axis Bank, Indusind Bank, State Bank of India, Kotak Mahindra Bank, Bank of Baroda and Abu Dhabi Commercial Bank.
Several deals under the lens
The ED is also investigating Malvern Travel Limited, a company based in the UK. CKL had a 49 percent stake in Malvern Travel. Yes Bank had sanctioned credit of 47 million pounds for refinancing outstanding loan of Axis Bank worth of 28.8 million pounds.
For obtaining this loan, former group CEO of Cox and King Peter Kerkar, former Group CFO of CKL Anil Khandelwal, former director of Malvern Abhishek Goenka and former director of Cox and King Ajit Menon had given a presentation to the bank.
However, Malvern defaulted on its debt obligation in June 2019 and in July this loan account has become a non-performing asset.
As per the PWC audit, Goenka has presented forged end-use certificates dated October 16, 2018. Account statements of subsidiaries were also forged.
"The investigating agency has suspicion that CKL has siphoned off the entire loan taken from Yes Bank, which was their largest lender,” another source told Moneycontrol.
Another dubious loan dealing
Yes Bank had granted a working capital facility of Rs 525 crore. However, CKL started defaulting in June 2019 and it was classified as NPA in August 2019.
Between financial year 2016 and financial year 2019, CKL reported consolidated sales worth of Rs 11,858 crore. Out of Rs 11,858 crore, around Rs 6500 crore came through its business with Ezeego, an online travel agency. CKL has a 7 percent stake in Ezeego.
The remaining sales worth of Rs 3,800 crore were from 15 other customers. In the forensic audit, PWC found that these 15 companies are bogus and no travel agencies ever operated from these addresses.
PWC found in their audit that CKL received only Rs 679 crore from Ezeego, even though the total business was worth Rs 6,500 crore. Although there were collections from the 15 customers to the tune of Rs 1,869 crore in the company ledger, no actual funds were in the bank account.
PWC also found reported sales of Rs 5,278 crore from 147 customers between April 2014 and June 2019. However, the audit found a negligible amount in the bank account.
The ED may also investigate the sale of Holiday Break Education Limited (HBEL).
CKL sold its substantial and valuable education business housed in Holiday Break Education Limited for an enterprise value of Rs 4387 crore. However, the details on the utilisation of sale proceeds were not given by the directors and key management personnel.
Stake in Tourism Finance Corporation of India
Between 2017 and 2019, Redkite Capital, an NBFC, completed the acquisition of Tourism Finance Corporation of India (TFCI) with the help of SSG Capital and Koppara Sajeeve Thomas. The new promoters of TFCI acquired a 45 percent stake in TFCI for a consideration of Rs 570 crore.
According to sources, all the money for acquisition reportedly came from loans. The loans came from three sources and 38 percent of loans (Rs 150 crore) are provided by Ezeego One Travels and Tours Ltd, which as per the annual returns of Cox and Kings, is a company related to Cox and Kings and its promoters.
Ezeego is in the business of offering a wide range of travel products and services through a portal. CKL holds 7.9 percent in the firm while 91.3 percent shares are held by its promoters of group entities. Urrshila Kerkar, who is a director in CKL and Ezeego, holds 42 percent shares in Ezeego.
Yes Bank had sanctioned credit facilities of Rs 945 crore from April 2017 and Ezeego defaulted in its payment in March 2019.
The audit report further says that Ezeego is involved in criminal conspiracy with key management personnel of CKL, and siphoned off around Rs 200 crore. Ezeego transferred around Rs 200 crore to Redkite Capital Private Limited, which is promoted by families of Anil Kahndelwal (CFO of CKL), Naresh Jain (Internal Auditor of CKL), and Shayama Maheshwari (founder of SSG).
The ED arrested Yes Bank co-promoter Rana Kapoor on March 7. Kapoor is in judicial custody. His bail plea would be heard on June 12.