The Securities and Exchange Board of India has barred Bombay Dyeing Company along with its promoter entities – Nusli Wadia, Ness Wadia and Jehangir Wadia – from the securities market for a period of two years for alleged misrepresentation of financial statements for as many as six years starting FY12.
The capital markets watchdog has also imposed a total monetary penalty of ₹15.75 crore on the company, the three members of the Wadia family along with few other individuals.
“… Noticees were allegedly involved in perpetrating a fraudulent scheme of misrepresentation of financials statements of BDMCL (Bombay Dyeing), that originated in FY 2011-12 and continued till FY 2018-19, with the merger of real estate business of Scal with BDMCL,” stated the 100-page long Sebi order issued late on Friday.
The roots of the matter go back to June 2011 when the capital market issued a show cause notice to the company, its promoter entities and few other individuals based on an investigation of the company’s financial numbers for the period between FY12 and FY19.
The crux of the matter was the company’s dealings with Scal Services, an unlisted entity engaged in the real estate business and owned – during the period of investigation – by various entities belonging to the Wadia Group.
The Sebi probe found that a major portion of the revenue from the real estate business of Bombay Dyeing came from bulk sales made to Scal Services.
For instance, dealings with Scal Services accounted for 83 per cent of the total real estate revenue of Bombay Dyeing in FY14, while the share was pegged at 60 per cent in FY12 and 68 per cent in FY15.
The share dropped to 38 per cent in FY18 before the real estate business of Scal Services was merged with the company in FY19, as per the Sebi findings.
More importantly, the Sebi order stated that the shareholding of Scal Services was maintained in a certain way only to avoid it coming under the ‘Associate Company’ definition, which, in turn, would have forced Bombay Dyeing to consolidate the financial statements of Scal Services with itself.
“The entire shareholding of Scal was structured in a manner to camouflage the actual shareholding of BDMCL in Scal. This structured manner of devising the shareholding pattern reflects a deliberate attempt on the part of BDMCL/ its Promoters to mislead the non-promoter investors of the listed entity. By holding its entire shareholding in Scal through various other investment companies of Wadia Group, BDMCL ensured non-consolidation of transactions carried out with Scal although exercising absolute control over Scal. Based on the same, the consolidated financial statements of BDMCL are alleged to be untrue and misleading for the shareholders of the listed company during the IP (investigation period),” noted the Sebi order.
“… it has been alleged that BDMCL, along with Scal, executed a ‘well thought out and deliberate’ fraudulent and manipulative scheme to record non-genuine sales made to Scal to the tune of Rs. 2,492.94 crores and profits to the tune of Rs. 1,302.20 crores during FY 2011-12 to FY 2017-18 by fraudulently entering into MoUs with Scal, a Group Company,” stated the order passed by Sebi whole time member Ananta Barua.
The Wadia family members – Nusli, Ness and Jehangir – have also been barred from being associated with any listed company or a Sebi-regulated entity as a Key Managerial Personnel (KMP) for a period of one year.
Source: https://news.google.com/__i/rss/rd/articles/CBMimQFodHRwczovL3d3dy5idXNpbmVzc3RvZGF5LmluL2xhdGVzdC9jb3Jwb3JhdGUvc3Rvcnkvc2ViaS1maW5kcy1ib21iYXktZHllaW5nLXdhZGlhLWZhbWlseS1tZW1iZXJzLWd1aWx0eS1vZi1maW5hbmNpYWwtbWlzcmVwcmVzZW50YXRpb24tMzUwNTg1LTIwMjItMTAtMjLSAQA?oc=5
