Market regulator SEBI has barred five entities, including Mishtan Foods and its promoter and CMD Hiteshkumar Gaurishankar Patel, from the securities markets till further orders. The ban has been imposed for alleged financial mismanagement, fraudulent transactions and corporate governance lapses. Mishtan Foods Limited (MFL) was also barred from raising funds from the public along with 12 entities including Hiteshkumar, Navinchandra Patel (CFO), Ravikumar Patel (former CFO) and Jatinbhai Patel (former whole-time director), PTI reported. Banned till further orders.
SEBI found this flaw
According to the report, SEBI found that MFL had negligible fixed assets in its books and negative cash flow from its operating activity and very low inventory compared to its large sales figures during the investigation period. SEBI found that the number of public shareholders of MFL has increased from just 516 at the end of FY2018 to 4.23 lakh at the end of September 2024 quarter. MFL's sole promoter Hiteshkumar sold MFL shares during the July-August period, netting him around Rs 50 crore and the promoter stake has been reducing since the March 2024 quarter.
The draft letter of offer was later withdrawn
Mishtan Foods had filed a draft letter of offer with SEBI for a rights issue of about Rs 150 crore in May 2023, however, it was later withdrawn. Later, the company launched a rights issue of Rs 49.9 crore in April 2024 and the issue proceeds were embezzled by transferring them to partners/directors of its group entities. In August this year, MFL filed a fresh draft letter of offer with the stock exchange for a second rights issue amounting to less than Rs 50 crore.
Instructions not to approve rights issue application
The regulator also directed BSE not to approve any rights issue application filed by MFL until further orders. SEBI also issued show cause notices to 24 entities including MFL, its key officials and others as to why investigation should not be conducted against them and directed them to file their reply/objections within 21 days. The interim order came from a detailed investigation covering the period April 2017 to March 2024 following complaints of GST fraud and other financial irregularities by Mishtan Foods.
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