An Indian investigating agency has accused French spirits group Pernod Ricard in court documents of illegally making profits in India of $23 million by giving false price information and conspiring in an email campaign to sway New Delhi city's liquor policy.
The latest accusations against Pernod by India's financial crime agency, the Enforcement Directorate, detailed in the agency's 14,000-page filing of Jan. 6 in a New Delhi court, formally name the French group's local unit as an accused.
The new allegations represent an escalation of problems for Pernod in India, a key growth market where it has a 17% share. The maker of Chivas Regal, Glenlivet and Absolut Vodka was accused in November by the Indian agency of violating New Delhi city's liquor policy to boost market share. Pernod denies wrongdoing.
In the Jan. 6 filing documents, which are not public and details of which have not been previously published, the federal agency accused Pernod of a "conspiracy to gain illegal benefit by submitting wrong affidavit" to Delhi authorities while seeking pricing approvals for its brands.
The city's policy in 2021 required liquor manufacturers to disclose their lowest factory prices in the entire nation so that the local government could set competitive prices and boost revenue. But Pernod gave "false", higher prices, helping it earn "excess profit" of $23 million, the agency alleged in the filing seen by Reuters.
Pernod thus earned "a huge additional profit which was ineligible to them and should have been passed to the consumers," the filing said. Pernod Ricard India's net profit in 2021-22 stood at $176 million, its regulatory disclosures show.
Responding to the latest accusations, Pernod Ricard India said in a statement to Reuters it was relying on the judicial process to demonstrate its legal compliance. It said the agency's allegations were "factually incorrect", without elaborating, and added it is cooperating with the authorities.
The Enforcement Directorate and the Delhi city government did not respond to emails requesting comment.
If found guilty, Pernod Ricard India Pvt Ltd, represented by its Chief Operating Officer Rajesh Mishra, and Benoy Babu, the head of its international brands business, could be fined and jailed for three to seven years, under Indian law. The Delhi court has asked the accused in the case to be present at its trial hearing of the Indian agency's complaint on Feb. 23.
Mishra and a lawyer for Babu did not respond to Reuters emails and messages seeking comment.
Babu was arrested in November for alleged violations of Delhi's liquor policy and his bail plea was rejected this week and he continues to be in jail. He has told the court his arrest is "illegal" and he was "falsely implicated".
Mishra has not been arrested.
GROWTH MARKET
New Delhi is a critical growth market for alcohol companies. Under its rules in force in 2021, liquor manufacturers were barred from applying for city retail licences to avoid formation of syndicates that could lead to over-charging and brand pushing.
The Enforcement Directorate said in a New Delhi court filing in November that the city's policy prohibited manufacturers from participating in retail sales but Pernod effectively used corporate guarantees to invest in retailers who bid for store licenses. Pernod has denied any wrongdoing.
In that filing, the agency alleged Pernod provided $24 million in corporate guarantees to its banker HSBC, which then issued loans to retailers who were bidding. In return, stores stocked more Pernod liquor, boosting its market share.
The court documents did not allege any wrongdoing by HSBC, which declined to comment on the agency's latest submissions.
In the new filing, the agency cited extracts of a Pernod PowerPoint presentation that mentioned an internal plan to "take control of retail shops, create flagship stores". The agency described that as a bid to control "retail businesses in Delhi".
Citing what it called "additional proof", the agency also said Mishra, who was acting India chief financial officer (CFO) in mid-2021, consented to the issuance of corporate guarantees for the loans, and informed group CFO Helene de Tissot about the strategy.
Included in the filing was an email that the agency said was from Mishra to Tissot justifying giving the corporate guarantees. Reuters was unable to independently confirm details in the email.
Pernod's "support" of $24 million to the associates bidding in Delhi had the potential to generate an additional $15 million "benefit over 3 year period", the email said.
The guarantees do "not breach any legal representations in our group external financings", the email added.
Mishra, according to the email cited by the agency, wrote that the company's partnership with retailers "will also enable us to counter local players' threat, our other key battle ground".
The Indian court documents did not contain any response from Tissot to the email. A Pernod spokesperson told Reuters Mishra and Tissot had no comments for the story.
The Indian agency stated that Pernod, which wanted to strengthen its control of retail distribution in Delhi, was part of an industry campaign to lobby authorities to privatise retail liquor stores. It alleged that Babu was "fully involved in the conspiracy" to send 4,000 emails to "influence policy formulation to suit the interest of Pernod".
The emails were to back a government panel which had proposed - and later formalised into policy in 2021 - that authorities should exit the retail business and let only private players bid for store licences, the documents showed.
Delhi last year revoked that policy, and liquor is now only sold via government-run shops.
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