Mishtann Foods Shares Fall 20% Amid SEBI Fund Misuse Probe

Mishtann Foods Ltd has faced significant setbacks as its shares hit the lower circuit limit of 20% for the second consecutive session on December 9, 2024. This sharp decline follows a show-cause notice issued by the Securities and Exchange Board of India (SEBI) regarding alleged fund misappropriation amounting to ₹100 crore.

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SEBI’s Allegations and Interim Order

SEBI's investigation revealed that Mishtann Foods allegedly inflated sales and purchases through fictitious transactions and misappropriated funds via group entities. The company, along with 23 other entities and individuals, has been prohibited from accessing capital markets, buying, or selling securities. 

Specific individuals and entities have also been barred from associating with intermediaries or listed companies. Furthermore, SEBI directed Mishtann to:

• Return ₹49.82 crore from misused rights issue proceeds.
• Recover ₹47.10 crore allegedly diverted to promoters or directors.

Mishtann must also form a new audit committee to ensure stricter oversight of related party transactions and financial disclosures.

Company's Response

Mishtann Foods has denied the allegations, asserting that the show-cause notice is merely an interim measure seeking clarification and not a conclusive judgment. The company stated that it does not agree with SEBI's observations and is working with its legal team to address the issues raised.

Market Impact

Mishtann’s shares plummeted by 20% for the second day, reaching ₹9.94 and reducing its market capitalization to ₹1,071.15 crore. Over two trading sessions, Mishtann Foods stock has lost 35.95%, with its market cap dropping by 41%. In the past week, the share price has declined by 30%, and over the last month, the decline stands at 31.96%.

SEBI's Mandates

SEBI has imposed the following requirements on Mishtann Foods:

• Restriction on public fundraising and trading activities until further notice.
• Strengthening corporate governance by forming a new audit committee.
• Ensuring financial transparency through enhanced oversight of related party transactions.

The developments highlight the critical need for companies to maintain transparent financial practices and adhere to regulatory guidelines to uphold investor confidence.