InvestorQ : Why has SEBI put such a huge penalty on Prabhat Dairy?
sarah Leo made post

Why has SEBI put such a huge penalty on Prabhat Dairy?

Rashi Mehra answered.
7 months ago

SEBI has directed Prabhat Dairy to cooperate with the forensic auditors and deposit Rs.1292 crore in a nationalised bank within seven days. SEBI had appointed Grant Thornton as the forensic auditor to ascertain circumstances in relation to financials of Prabhat Dairy.

Grant Thornton was appointed to investigate manipulation of accounts, misrepresentation of financials and wrongful diversion of funds by promoters. In its interim order, SEBI noted that the company had failed to cooperate with the forensic auditors.

SEBI has also alleged that the company appeared to be wilfully denying access to documents to the forensic auditor appointed by SEBI. In addition, SEBI has also received complaints against Prabhat Dairy alleging defrauding of investors by promoters / directors.

It is for this reason that SEBI has passed an interim order and directed Prabhat Dairy to deposit Rs.1292 crore into a special interest bearing escrow account in a nationalised bank. The audit committee of Prabhat will have to furnish a compliance report to SEBI in this regard.

Back in January 2019, Prabhat Dairy had informed the stock exchanges that its board had approved the sale of the firm's shareholding in its 100% subsidiary, Sunfresh Agro Industries to Tirumala Milk Products for Rs.1227 crore. However, there has been no further information on that front.

In the recent past, many smaller companies have shown clear lapses in corporate governance and this appears to be one more such case.