Suspense Crime Sach Ka Dam
Market regulator Sebi has barred five entities, including Mishtan Foods and its promoter and CMD Hiteshkumar Gaurishankar Patel, from securities markets till further orders. The ban has been imposed for alleged financial mismanagement, fraudulent transactions, and corporate governance lapses. According to PTI news, Mishtan Foods Limited (MFL) has also been barred from raising funds from the public and 12 entities, including Hiteshkumar, Navinchandra Patel (CFO), Ravikumar Patel (former CFO) and Jatinbhai Patel (former whole-time director), have been banned till further orders.
SEBI found this flaw
According to the report, SEBI found that MFL has negligible fixed assets in its book and has 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 a mere 516 at the end of FY18 to 4.23 lakh at the end of the September 2024 quarter. Hiteshkumar, the sole promoter of MFL, sold MFL shares during the July-August period, earning him about Rs 50 crore,e, and the promoter’s stake has been declining 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The draft letter of offer was later withdrawn.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filed a draft letter of offer with SEBI for a rights issue of around Rs 150 crore in May 2023, however, it was later withdrawn. Later, the company offered a rights issue of Rs 49.9 crore in April 2024 and the issue proceeds were siphoned off 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 of an amount of less than Rs 50 crore.
Instructions not to approve the rights issue application
The regulator also directed BSE not to approve any rights issue application filed by MFL till further orders. SEBI also issued show cause notices to 24 entities, including MFL, its key officials, and others, as to why an investigation should not be conducted against them and also directed them to file their replies/objections within 21 days. The interim order came from a detailed investigation covering the period from April 2017 to March 2024 following complaints of GST fraud and other financial irregularities by Mishtan Foods.
