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Mishtann Foods Shares Hit Lower Circuit of ~20% Amid SEBI Action

Updated on: Dec 6, 2024, 4:37 PM IST
The shares of Mishtann Foods reacted negatively after SEBI barred the company from raising public funds for 7 years.
Mishtann Foods Shares Hit Lower Circuit of ~20% Amid SEBI Action
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On Friday, December 6, shares of Mishtann Foods shares dropped by 20% after the Securities and Exchange Board of India (SEBI) barred the company from raising public funds for seven years. This action follows allegations of significant misrepresentation in the company’s financial statements.

SEBI Directives: Misappropriation and Fund Recovery

SEBI has ordered Mishtann Foods to recover nearly ₹100 crore, which was allegedly misappropriated or diverted through group entities and its promoters. Specifically, ₹49.82 crore was misused through group entities, while ₹47.10 crore was diverted to the promoters and directors, including relatives, through fictitious sales and purchases with associated entities.

Mishtann Foods’ Response: Denial of Allegations

In response to the SEBI order, Mishtann Foods issued a clarification on December 6, stating that the interim order is a “Show Cause Notice” (SCN), and the company has been asked to explain certain allegations. The company disagrees with the contents and the preliminary findings of the interim order, asserting that it denies all the allegations presented. Mishtann Foods emphasised that its legal and compliance team is actively working to address the issues and take the necessary actions.

Intention to Challenge SEBI’s Interim Order

Mishtann Foods further stated that it plans to pursue available legal remedies against the interim order. The company confirmed that it will follow the due process of law and address the queries raised in the SCN.

SEBI’s Allegations

In the interim order issued on December 5, SEBI’s Whole-time Member Ashwani Bhatia outlined the extent of the alleged fraud committed by Mishtann Foods. He pointed out that over 90% of the credit and debit entries in the company’s bank accounts were with entities that were either related to each other or to Mishtann Foods itself. Bhatia noted that these entities, which had no real business operations, acted as pass-through vehicles to facilitate fund transfers.

The SEBI order further emphasized that Mishtann Foods’ operations and the interests of its over 4.2 lakh shareholders were controlled by Managing Director Hiteshkumar Gaurishankar Patel (HGP), who is also the sole promoter with a 43% stake in the company. Bhatia highlighted concerns about HGP’s control over fake buyers and sellers, noting that he had recently raised approximately ₹50 crore by offloading 3 crore shares of Mishtann Foods, while still retaining a significant number of shares. Bhatia warned that this could result in financial losses for unsuspecting retail investors.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

Published on: Dec 6, 2024, 10:03 AM IST

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