Mumbai: The capital market regulator on Thursday barred Mishtann Meals Ltd (MFL) and 5 of its administrators from accessing the market, citing alleged monetary misrepresentation and fraud.
The interim order of the Securities and Trade Board of India got here after its investigation from 1 April 2017 to 31 March 2024 revealed alleged critical monetary irregularities within the firm engaged within the processing and manufacturing of agricultural merchandise.
MFL’s pretend entities
MFL was discovered to have inflated its gross sales and buy figures via the creation of faux entities—a lot of which had been linked to the corporate’s managing director Hiteshkumar Gaurishankar Patel, and his kinfolk, in response to the order. These shell firms had been used to maneuver funds between MFL and its associates, distorting the corporate’s financials, it stated.
Sebi stated its investigation revealed that over 90% of MFL’s gross sales and 84% of its purchases through the investigation interval had been discovered to be fictitious, involving round cash flows between associated events and non-existent firms. It additionally discovered that ₹96.92 crore was misappropriated via fraudulent transactions, together with a rights difficulty misutilization the place almost ₹75 crore was transferred to non-operational entities linked to MFL’s promoters, the regulator stated.
MFL’s failure to cooperate with the investigation, claiming that every one data had been destroyed in a fireplace in Could 2022, additional raised suspicions concerning the firm’s intentions, the order stated.
In response to those findings, Sebi restrained the corporate from elevating any funds from the general public till additional discover. It additionally barred the administrators of MFL from shopping for, promoting, or dealing in MFL securities, or accessing capital markets in any kind. Sebi additionally directed the corporate to return the misappropriated funds from the rights difficulty, amounting to ₹49.82 crore, and the ₹47.10 crore diverted to promoters and administrators.
Sebi’s whole-time member Ashwani Bhatia noticed within the order that the dimensions of the fraud, coupled with MFL’s fast rise within the inventory market—rising its market capitalization to ₹1,600 crore by December 2024—prompted critical considerations concerning the corporate’s operations and its affect on investor confidence.
The inventory traded at ₹3.37 apiece in September 2018 and surged to an all-time excessive of near ₹34.68 in 2019. It now trades round ₹15.52 per share. The variety of shareholders rose from 516 on the finish of FY18 to 4.23 lakh as of September 2024—a surge of 800 occasions in 6 years.
“The gross misrepresentation of financials by MFL repeatedly for seven years, considered within the gentle of the disclosure-based regime of the securities market, has potential to impair the integrity of the securities market. That is of concern, given the truth that the future of MFL and over 4.2 lakh of its shareholders lies basically within the palms of 1 particular person, i.e., Hiteshkumar Patel, who’s the Managing Director and now additionally the only promoter of MFL holding approx. 43% shares of MFL,” the order stated.
Sebi additionally alleged that the managing director managed a number of of the pretend consumers and sellers of MFL via his kinfolk. “The truth that he just lately garnered approx. ₹50 crores by offloading round 3 crore MFL shares and nonetheless holds one other 47 crore shares of MFL illustrates the danger of imminent monetary loss particularly to unsuspecting retail shareholders,” Sebi stated.
