Sebi, which is probing financials of Prabhat Dairy, asked it to deposit ₹1,292 crore in an escrow account
The Securities and Exchange Board of India (Sebi) which is investigating suspected irregularities in the delisting of Prabhat Dairy Ltd Tuesday asked the company to deposit ₹1,292 crore in an escrow account for failing to cooperate with forensic auditors.
Sebi is probing whether Prabhat Dairy deliberately depressed its book value and short-changed minority investors during its delisting process. Sebi started the probe and subsequent forensic audit following a preliminary examination by the stock exchanges.
In their preliminary report, both BSE and NSE in 2019 said the case warranted detailed scrutiny and that they would not approve a voluntary delisting. They also recommended a forensic audit. Sebi had also received several complaints from minority investors alleging delays in delisting and manipulation of books of accounts.
The matter pertains to Prabhat Dairy entering into a definitive sale agreement on 21 January 2019 with Tirumala Milk Products, a unit of Lactalis of France, to sell its entire dairy business and its subsidiary Sunfresh Agro for ₹1,700 crore. An amount of ₹1,316.79 crore was received during the FY2019-20 post certain adjustments.
Sebi commissioned Grant Thornton Bharat LLP to conduct the forensic audit in July this year to ascertain the financials of the firm for years ended 31 March 2019, and 31 March 2020. It was asked to check for manipulation of books of accounts, misrepresentation of financials or business operations, wrongful diversion of funds by promoters, directors or key managerial persons and business transfer and share-purchase agreements.
In its Tuesday order, Sebi said Prabhat Dairy’s promoters and managing director repeatedly failed to cooperate with the forensic auditor. Of the 27 documents sought, the promoters provided only three, Sebi noted. However, on the basis of a preliminary assessment, the forensic auditor said it was not able to directly ascertain the sale proceeds of ₹1,316.79 crore.
“Unless the forensic audit is conducted, Sebi will not be in a position to determine whether or not the company has indulged in mis-statement of accounts, diversion of funds to its subsidiaries/associates, etc. which money belongs to its shareholders," Sebi said.