Mumbai: The Securities and Exchange Board of India (Sebi) on Monday passed an interim order in the case of fund diversion and falsifying books of Ricoh India Ltd.
Due to the books of accounts of the auto parts maker not being able to present a “true fair picture" in 2015-16, the company ended up reporting losses of Rs1,118 crore in its financial statements for the year ended 31 March 2016 in its annual report for FY2015-16.
Subsequently, Ricoh India on 19 July 2016 admitted its accounts appear to have been “falsified" even as its Japanese promoter entity Ricoh Co. Ltd proposed to recapitalise the firm for the loss.
In the order passed on Monday late evening, the regulator said there is urgent need for it to intervene. While it barred seven former officials of Ricoh India in a rare instance, Sebi decided to appoint its own forensic auditor to examine the extent of fraud in a listed company. Typically, Sebi relies on the company to conduct an investigation.
“We need to take steps for determining the full extent of fraud by conducting a detailed forensic audit of the company, covering the years when the fraud is suspected to have started and, if required, even beyond that to protect the interest of the public shareholders," said G. Mahalingam, whole-time member, Sebi, in the order.
The regulator found that the conduct of the former six key management personnel (KMP) of Ricoh and one other “prima facie appears to be fraudulent and unfair in nature".
Sebi has restrained the above mentioned people from accessing the securities market or buying, selling or otherwise dealing in the securities market.
Sebi also noted that starting 2012 Ricoh’s financial health has been deteriorating, even after the infusion of funds by its promoters.
“The company has neither been able to become profitable, nor is able to meet its financial liabilities. Also, Ricoh Japan has disclosed the possibility of additional losses from Ricoh India," said the Sebi order.
The regulator is not ruling out that the extent of fraud could be larger than the estimated Rs1,118 crore, making it one of the largest accounting fraud cases since the Satyam scam.
It is quite possible that the fraud is yet to be unravelled and it may run deeper than ascertained by company-commissioned forensic audits, Sebi said.
Ricoh had commission audits by PwC India and its special internal investigation team for a period of six months starting financial year 2015.
“Moreover, the exact amount of fraud has not been ascertained to six months which was insufficient as the fraud had started long before the period of audit," said Sebi.
Sebi’s audit will cover 2012-13 to date.