Recently, a company called Mishtann Foods Ltd. has been facing SEBI compliance charges due to multiple alleged financial mismanagement. The company’s association with other listed or soon-to-be listed companies has also been restricted.
However, a question arises. What led to this fiasco? Why is this company coming under heat now and how does its future look ahead?
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SEBI compliance and financial mismanagement
The Indian securities market is governed by SEBI, a statutory authority and market watchdog. SEBI regulates stock market operations, protects shareholders’ rights, and ensures the safety of their investments.
By harmonising its legislative laws and self-regulating companies, it also seeks to prevent fraud. A robust professional market for facilitators is also made possible by the regulator.
SEBI offers a platform where issuers may appropriately raise capital. Additionally, it guarantees the investors’ protection from financial mismanagement. SEBI examines stock transactions and protects the securities market against unethical behaviour.
Both stockbrokers and sub-stockbrokers are under its authority. It helps investors become more knowledgeable by educating them about the market.
Recently, Mishtann Foods Ltd. came under SEBI’s heat. This is a deep dive into everything you need to know about this fiasco.
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Background of Mishtann Foods Ltd.
Established in 1981 Mishtann Foods Ltd. is an agro-product business situated in India. The company works in production, processing, and trade-related to agriculture. It provides agri-products. The company sells a variety of salts, including normal salt, crystal salt, as well as rock salt.
The company sells packs of one kilogram (kg), five kilograms, ten kilograms, twenty-five kilograms, and twenty-five kilograms of several types of basmati rice, including Snowflake, Pristino, Jacinth, Rozana, Jasper, and Mahabat.
Allegations against Mishtann Foods Ltd.
The allegations against the company are of business governance violations, deceptive transactions, and financial mismanagement.
In comparison to its substantial sales statistics during the inquiry duration, MFL had very little inventory, insignificant fixed assets on its accounts, negative operating cash flow, and a circular movement of money that was first determined to be fraudulent.
By the conclusion of the September 2024 quarter, MFL had 4.23 lakh public shareholders, a significant rise from just 516 at the close of FY18.
The only promoter of MFL, Hiteshkumar, sold out shares of the company in July and August for about ₹50 crore. As of the March 2024 quarter, the promoter ownership has been decreasing.
The corporation embezzled ₹47.10 crore in money by registering fake sale and buy operations with the group units.
In April 2024, the firm issued a rights issue for ₹49.9 crore. It was discovered that the issuance funds had been improperly transferred to the directors and partners of its group companies.
Actions taken by SEBI
Five companies, including Mishtann Foods and its founder, along with CMD Hiteshkumar Gaurishankar Patel, were barred from the securities markets by SEBI until fresh orders were issued due to a lack of SEBI compliance.
Additionally, the regulator prohibited MFL from accepting funds from the general public. Until additional orders are issued, it forbade 12 entities, particularly top management, from identifying with any SEBI-registered company, listed enterprise, or company that plans to seek funds from the general public.
SEBI ordered MFL to return the ₹47.10 crore that was transferred to MFL’s promoters and directors and their family members through fraudulent sales and transactions using group businesses, as well as the ₹49.82 crore that was misused or stolen through group entities.
Additionally, the regulator instructed BSE to hold off on approving any rights issue applications submitted by MFL until further directives.
SEBI instructed MFL, its top officials, and others—to justify why they shouldn’t be subject to an inquiry and to submit their responses or concerns within 21 days.
Conclusion – aftermath
Following SEBI’s decision to exclude the company from the securities markets until future orders were received, Mishtann Foods’ shares fell 20%, closing at Rs 9.94 on the BSE’s lower circuit.
After SEBI ordered Mishtann Foods to retrieve around Rs 100 crore that was allegedly embezzled through questionable dealings with linked parties, the stock continued its downward trend on December 9th, 2024.
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FAQs
- What is the business of Mishtann Foods?
The business engages in agricultural production, processing, and trading. It offers agricultural items. The business sells a range of salts, such as rock salt, crystal salt, and regular salt. The company also offers different varieties of rice.
- What were the charges against Mishtann Foods?
There are many allegations against the company. In comparison to its substantial sales statistics during the inquiry duration, MFL had very little inventory and insignificant fixed assets on its accounts. By filing fictitious sell and buy activities with the group entities, the company embezzled ₹47.10 crore.
- Who is the promoter of Mishtann Foods?
The chief managing director Hiteshkumar Gaurishankar Patel is the promoter of the company. Five companies, comprising Mishtann Foods and its promoter and CMD Hiteshkumar Gaurishankar Patel, were barred from the securities markets by SEBI on Thursday due to allegations of corporate governance violations, fraudulent transactions, and financial mismanagement.
- What is the share price prediction for Mishtann Foods in 2030?
The company’s future is extremely uncertain. SEBI prohibited 12 entities, especially top management, from associating with any listed firm, SEBI-registered company, or entity that intends to raise money from the general public until further instructions are made. It is very difficult to foretell what will happen to the share prices in 2030.
- What happened to Mishtann Foods’ share prices?
On the BSE’s lower circuit, Mishtann Foods’ shares dropped 20% to close at Rs 9.94 on December 9th, 2024 after SEBI decided to bar the company from the securities markets until further orders were received.
