Shares in Dewan Housing Finance Corp Ltd (DHFL) jumped as much as 21 per cent on Wednesday, after the company released a report by an independent chartered accountant saying it had not created shell companies to divert funds.

The home loan provider has been under scrutiny since investigative media outlet Cobrapost alleged in January that loans from state-run lenders were diverted by Dewan Housing to shell companies, including those linked to its controlling shareholders.

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The company said in January that the report was unfounded and malicious, and that it had engaged lawyers to defend itself.

The auditor's report examined Dewan's deals with 26 entities for loans worth Rs 115.22 billion ($1.63 billion) and said there was no indication that Dewan had created shell companies to divert funds.

There was no evidence to support the insider trading allegations made by Cobrapost, the auditor said, nor was it evident that the company's largest shareholders used their influence to sanction loans.

The auditor, however, said Dewan had inadequately monitored the way funds were used after loans had been disbursed to 15 borrowers totalling up to Rs 74.85 billion. There were also instances of deviation from the terms of sanction of loans, which had major risk implications, the auditor said. “Non-compliances with the terms of the borrowing and possible diversion of funds, if any, by the borrowers would have escaped attention of the Company,” it said.

Dewan Housing released the report late on Tuesday by independent chartered accountant T . Ostwal & Associates LLP, which was appointed in consultation with an audit committee to verify the allegations made against the firm. Dewan Housing's stock has lost a quarter of its value since Cobrapost's report in late January.

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