Shares of C2C Advanced Systems hit the 5 percent lower circuit on February 11 after an independent inquiry by the auditor flagged lapses in the company’s Red Herring Prospectus (RHP), citing misrepresentation of facts.
The NSE had ordered an independent review of the company’s financial disclosures in the RHP following an investor complaint. Based on the findings, the exchange directed the company to disclose the auditor’s observations along with its comments. However, despite being given adequate opportunity, C2C Advanced Systems failed to comply. Consequently, the findings were disseminated by the company in its latest exchange filing on February 10, 2025.
Following the development, shares of C2C Advanced Systems slipped to Rs 697.20 apiece, triggering the lower circuit limit. The company’s market capitalisation declined to Rs 1,160.22 crore.
According to the auditor’s report, discrepancies were noted between the financial data disclosed in the RHP and the company’s audited financial statements. One key issue involved related party disclosures, where loans payable were mentioned as Rs 13.29 lakh in the RHP, whereas the actual figure in the company’s books stood at about Rs 13 crore as of September 30, 2024.
Further, a review of the company’s sales register revealed total sales of Rs 94 crore during the review period, of which Rs 74 crore—amounting to 78 percent—remained outstanding as of September 30, 2024. This raised concerns over the company’s receivables and collection efficiency.
The auditor also highlighted that sales to four key customers accounted for Rs 70 crore, or 74 percent of total sales. All four customers were found to be connected to C2C Advanced Systems. Notably, two of these customers—Synergy Log-in System SDN BHD and Synergy Information Technology Inc—were not disclosed as related parties in the RHP and financial statements.
Additionally, the company failed to submit Softex forms for software exports as required under the Foreign Exchange Management Act (FEMA). This non-compliance raises concerns over the legitimacy of the company’s export transactions and constitutes a violation of FEMA regulations, the auditor noted.
C2C Advanced Systems shares list at 90% premium over IPO price on NSE Emerge
The listing of the SME issue C2C Advanced Systems was delayed in December 2024 after the Securities and Exchange Board of India (SEBI) directed the company to appoint independent auditors to evaluate its financial accounts after an investor complaint. Additionally, the regulator asked the National Stock Exchange (NSE) to set up a monitoring agency to oversee the utilisation of funds raised through the IPO. Following regulatory intervention, investors across all categories were given an option to withdraw their bids.
The public issue of C2C Advanced Systems, which specialises in defence and aerospace solutions, had seen demand soaring to 125 times with investors bidding for 36.56 crore shares, while only 29.15 lakh shares were available.
The shares of C2C Advanced Systems were listed at Rs 429.40 per share on the NSE SME, a premium of 90 percent against the issue price of Rs 226.
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