Shares of Mishtann Foods cracked 20% lower after it received a Show Cause Notice from capital market regulator over Rs 100 crore of company fund that Sebi said was misappropriated or diverted through group entities.
Mishtann Foods (MFL) has contested the allegations and said it 'doesn't agree' with the observations in the interim order. "The said Interim Order is a SHOW CAUSE NOTICE wherein explanation from the company has been sought on certain allegations against the company. The SCN is NOT a final order and is inter alia asking for an explanation from the Company," MFL said.
"MFL doesn’t agree with the contents and the prima facie observations of the said Interim order," the company statement added, denying all allegations. Mishtaan said its legal team is "making efforts to address the queries and take appropriate actions".
A day before, the interim order by Sebi had asked the company "to bring back the rights issue proceeds amounting to Rs 49.82 crore misutilised/ misappropriated/ diverted through group entities and the amount of Rs. 47.10 crore which was misutilised/ misappropriated/ diverted to promoters/directors of MFL and their relatives through fictitious sales/purchases with group entities". Read more here.
Sebi's whole-time member Ashwani Bhatia said the findings show 'misrepresentation of large proportions' in financial statements by MFL. The company inflated sale and purchase figures by 'booking fictitious transactions' with 'fake/non-existent entities', Sebi's notice said. These entities were created in the names of MFL’s promoters and their relatives.
Mishtann Foods has a market capitalisation of less than Rs 1,400 crore, and the shares are down 25% so far this year at around Rs 12-13 per share.
For the September quarter, promoters of the company have decreased their holdings from 46.87% to 43.48%.
Set up in 1981, Mishtann Foods processes various types of rice, including brown rice and basmati rice under brands like Snowflake, Pristino, Jasper, Rozana, Shahryar, and Mahabat. For FY24, only 1% of its revenue came through exports.
During April 2024, MFL has raised Rs 50 crore through a rights issue of 3 crore shares at Rs 15 per share. In June, the board had again approved another right issue of Rs 50 crore.
Mishtann had in November signed on celebrity Rashmika Mandanna as brand ambassador to endorse basmati rice and salt product lines.
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