At India’s second-largest engineering co, gaps emerge in electoral bond funding

The privately held infrastructure and engineering company that counts Larsen and Toubro Ltd as its closest competitor said in its annual report for FY23 that it bought ₹280 crore worth of electoral bonds between 1 April 2022 and 31 March 2023. 

The Election Commission’s data, however, reveals that MEIL bought electoral bonds worth ₹193 crore in FY23. Its subsidiary EveyTrans, a maker of electric buses, bought another ₹6 crore worth of electoral bonds in FY23, taking the MEIL group’s total spending on political donations during the year to ₹199 crore.

None of MEIL’s 77 other subsidiaries, associate firms, and joint ventures acted as a political donor in the financial year ended March 2023, according to Mint’s review of the Election Commission (EC) data.

This discrepancy in MEIL’s and EC’s data has left many scratching their heads, wondering if there could be more such gaps in accountability for these instruments that were meant to channel funds anonymously to political parties. The Supreme Court last month ruled that election bonds were unconstitutional and ordered the State Bank of India to stop issuing them.

A spokesperson for MEIL did not reply to emailed queries on the mismatch between the company’s spending on electoral bonds as stated in its FY23 financials and the EC’s data. 

“Any electoral bond lapses after 15 days. And no other individual or business group other than a political party could encash it. So these two different sets of numbers leave us with one answer: There was a problem with either SBI collating the data or something wrong with Megha,” said a Delhi-based lawyer on condition of anonymity. 

Here’s another explanation: “The problem (in two different sets of numbers of Electoral Bonds) could be because Megha could have purchased those bonds through companies which may not be subsidiaries or group companies,” said H.P. Ranina, a senior corporate lawyer and tax expert. 

“But say, a company that is owned or run by a promoter’s relative, or it could be that Megha bought the bonds on behalf of companies that are not its subsidiaries… So it’s difficult to establish the exact details,” Ranina added, referring to companies in which MEIL might own a stake but not count those as subsidiaries. (A parent or holding company needs to own at least a 50% stake in a subsidiary.)

Overall, MEIL and its affiliates have donated ₹1,353 crore to political parties since the election bonds were introduced in April 2019 (going by MEIL’s accounts for FY23 and the EC’s data for the other years), a shade less than Santiago Martin’s Future Gaming and Hotel Services, which has bought ₹1,368 crore worth of electoral bonds.

MEIL’s standalone financials reflect ₹293.26 crore in Donations Subscription expenses in FY23, as against ₹274.21 crore in the year ended March 2022. Of that, ₹280 crore went towards purchasing electoral bonds in FY23, against ₹248 crore in the year prior.

The EC’s data corroborates that MEIL purchased ₹248 crore worth of electoral bonds purchased in FY22. MEIL has not disclosed its spending on electoral bonds for any of the other years.

MEIL started as a small fabrication unit in 1989 and has grown to become India’s second-largest engineering, procurement and construction company, behind L&T. 

The company caught the attention of the country when the Election Commission revealed the data of political donations made through electoral bonds. The data issued by the EC, as shared with it by the State Bank of India, was in two separate sheets: One outlining donors and the dates; and the second revealing the political parties that received funds from the bonds. 

Megha Engineering’s revenue in FY23 slipped to ₹25,837.52 crore from ₹26,828.8 crore in the year prior, while its profit tumbled 22% to ₹2,332.82 crore.

Analysts expect MEIL to fare better in the ongoing financial year. 

Crisil analysts said the company’s revenue in the first six months of FY24 totaled ₹14,341 crore, a 10% growth over the corresponding April-October period of 2022.

“Revenue is estimated to increase to (about) ₹35,000 crore this fiscal with revenue visibility remaining healthy over the medium term due to strong order book position of ₹1.87 lakh crore as on September 31, 2023, along with orderbook to revenue ratio of 5.4 times as on March 31, 2022,” rating agency Crisil said in a research note dated 10 January. 

“Considering the ramp up in execution in the last quarter of the fiscal, revenue generation from the execution of international order book, stable revenue contribution from Western U.P. Power Transmission Company (WUPPTCL), ramp up in revenue from SEPC Power Private Limited post commencement in November 2021, stable revenue contribution from the acquired transmission asset, Lanco Anpara Power Limited, and manufacturing of the 9,218 buses by Olectra over the next 3 years, the consolidated revenue is expected to see healthy growth in the medium term,” Crisil said.