Mishtann Foods says Sebi's show cause notice unsustainable; stock jumps 9%

In the last four sessions Mishtann Foods has slumped 37 per cent after the company received a show cause notice from Securities and Exchange Board of India (Sebi) on December 5, 2024

Shares of Mishtann Foods were in high demand on Wednesday,  the company’s stock soared up to 9.2 per cent at Rs 9.78 per share on the BSE. At around 11:48 AM, a total of 14.96 crore shares of the company changed hands on the BSE. 

 

In the last four sessions the stock has slumped 37 per cent after the company received a show cause notice from Securities and Exchange Board of India (Sebi) on December 5, 2024. 

 

The recovery and high trading volumes in the stock on Wednesday came after the Mishtann Foods issued another clarification after market regulators’s show cause notice and barring the company and its promoter Hiteshkumar Gaurishankar Patel, and four other entities from the securities market for alleged financial mismanagement, fraudulent transactions, and corporate governance violations.

 

 

Mishtann Foods in the clarification said that it disagrees with the allegations in Sebi's interim order and considers them baseless. The company is seeking legal advice on the order's legality and believes it is unsustainable. 

 

“The prima facie view of the legal team is that the Order is unsustainable in law. Mishtann Foods Ltd. is therefore in the process of taking steps qua the Order in accordance with law and vehemently denies all allegations and insinuations in the Order. As the matter is sub-judice, it would not be proper to comment on the matter,” the company said in an exchange filing on Tuesday.

 

The company also assured stakeholders that its business operations and growth plans remain unaffected, and their interests will be protected. 

 

In its investigation Sebi found that Mishtann Foods engaged in circular trading with fictitious buyers and suppliers, many of which were shell entities controlled by the company's directors and associates, inflating the company's financials.

 

The regulator also noted a sharp increase in the company's public shareholder base from 516 in FY18 to 4.23 lakh in September 2024. Patel offloaded shares worth Rs 50 crore between July and August 2024, contributing to a decline in promoter holdings. 

 

Sebi has issued show-cause notices to 24 entities, including Mishtann and its key officials, requiring responses within 21 days. The interim order follows an investigation into the company's activities between April 2017 and March 2024, triggered by complaints of GST fraud and financial irregularities.

 

The company has a total market capitalisation of Rs 1,011.88 crore. Its shares are trading at a price to earnings multiple of 97.87 times and at an earning per share of Rs 0.09. 

 

At 12:05 PM; the shares of the company were trading 5.25 per cent higher at Rs 9.42  a piece. By comparison, the BSE Sensex was up 0.19 per cent at 81,665.72 level.   Mishtann Foods is engaged in the manufacturing, processing, and trading of food grains, agri-commodities, and fast-moving consumer goods (FMCG).