Shares of Asian Paints remained under pressure after news reports said proxy advisory firm InGovern pointed out several related party transactions between promoters.
At 10:38am, shares of the paints manufacturer were trading 0.3% lower at Rs 3,149.90 on the BSE. It hit an intraday low of Rs 3,125 and has fallen more than 2.6% in the past five trading sessions.
A report by the Business Standard said that Ingovern observed several related party transactions between Asian Paints and Paladin Paints & Chemicals, a private company owned by the Dani family, who are also promoters of Asian Paints.
Ingovern has reportedly highlighted the likely conflict of interest involving entities controlled by the Danis, which also supply raw material to the paint manufacturer.
According to a report by The Hindu Business Line, Ingovern has also sought the removal of promoters Ashwin Dani and his son Malav Dani from the board.
The markets regulator SEBI is already investigating transactions involving Paladin Paints and Chemicals, the report said.
“On October 24, APL put out an innocuous clarification to a news report. We dug deep. APL’s FY15-16 annual report lists PPCL as a related party from April 22, 2015. But APL, unlike most other companies, ‘does not list out’ the value of RPTs. Only an aggregate value is given. APL needs to present RPT details with each of the promoter-controlled entities, including PPCL, in terms of transaction value, nature of trade..." the report said quoting Ingovern.
“Promoter directors who ‘control’ entities supplying goods to APL should immediately resign,” Ingovern reportedly said in a note.
The latest development comes a month after a whistleblower flagged off related party transactions by the promoters of Asian Paints.
On November 25, the company issued a clarification to the stock exchanges in response to the two news articles quoted above and said there was "certain factually incorrect" information in the Ingovern report.
It said the claim that Paladin formed 7 percent of the value of goods purchased from promoter-controlled entities is factually incorrect.
"Out of Rs.553.88 crores of total purchases from related parties during the FY 2019 – 20, total purchase from Paladin was Rs.1.3 crores (which is lower than 0.2%) of total purchases from related parties," the filing said.
The company also said that it had provided all necessary details and explanations sought by the SEBI and NSE.
"We would like to reiterate that all the transactions involving related parties are undertaken in strict compliance with the provisions of law and necessary disclosures have been made in accordance with the applicable disclosure norms from time to time...," the company said.