The regulatory body accused the company of severe financial mismanagement, fraudulent transactions, and corporate governance failures.
The Securities and Exchange Board of India (Sebi)'s investigation revealed that Mishtann Foods engaged in a series of dubious practices, including circular trading with fictitious entities controlled by the company's directors and their associates. These fraudulent transactions inflated the company's financial performance, misleading investors and regulators.
The regulator has ordered the company to return approximately Rs 100 crore, which was allegedly misappropriated through these transactions. Additionally, Sebi has questioned the significant increase in the number of public shareholders from 516 in FY18 to 4.23 lakh in the September 2024 quarter. Hiteshkumar, the sole promoter of the company, offloaded shares during the July-August period, garnering around Rs 50 crore. The promoter's holding has been declining since the March 2024 quarter.
Sebi has issued show-cause notices to 24 entities, including Mishtann Foods and its key officials, to explain their involvement in these irregularities. The regulator will conduct a detailed inquiry into the matter.
Meanwhile, Mishtann Foods has clarified to the show cause notice issued by Sebi. The company has refuted the allegations of financial mismanagement and fraudulent transactions leveled against it.
In a statement, Mishtann Foods clarified that the show cause notice is not a final order and that the company intends to contest the allegations. The company's management denies all the purported allegations and is currently working with its legal team to address the queries raised by Sebi.
The company's board has decided to pursue legal remedies against the show cause notice. Mishtann Foods has appealed to the public to exercise restraint and respect the due process of law.
The company has assured its stakeholders that it will cooperate fully with SEBI and address the queries raised in the show cause notice.
Mishtann Foods is a FMCG company specializing in Basmati rice. It also produces salt, wheat and dal. The company has a large rice processing facility near Ahmedabad, giving it a cost advantage for exports. Mishtann offers a variety of Basmati rice products.
On a consolidated basis, net profit of Mishtann Foods rose 21.89% to Rs 106.57 crore while net sales rose 7.37% to Rs 341.87 crore in Q2 September 2024 over Q2 September 2023.