Mishtann Foods shares hit 20% lower circuit limit as SEBI bans MD from markets; all you need to know

SEBI also barred Mishtann Foods Ltd (MFL) from raising money from the public and prohibited 12 entities, including Hiteshkumar, Navinchandra Patel (CFO), Ravikumar Patel (former CFO), and Jatinbhai Patel (former whole-time director), from associating themselves with any SEBI-registered entity, any listed company, or any firm that intends to raise money from the public until further orders.

SEBI found that MFL has negligible fixed assets on its books and negative cash flow from its operating activity and a very low inventory as compared to its sizeable sale figures during the investigation period and were prima facie found to be fictitious, involving a circular flow of funds.

SEBI, in its interim order, also observed the number of public shareholders of MFL has drastically increased from a mere 516 at the end of FY18 to 4.23 lakh by the end of the September 2024 quarter.

The regulator noted that Mishtann Foods was prima facie found to be booking fictitious sale/purchase transactions with the group entities and misappropriating its funds, amounting to ₹47.10 crore.

SEBI's whole-time member Ashwani Bhatia said Hiteshkumar, Navinchandra, Ravikumar, and Jatinbhai failed to perform their duties and obligations, which resulted in the publication of untrue and misleading financial statements of MFL for seven consecutive fiscal years from FY18 to FY24.

Mishtann Foods had filed a draft letter of offer for a rights issue of around ₹150 crore in May 2023 with SEBI; however, it was later withdrawn.

Later, the company came up with a rights issue worth ₹49.9 crore in April 2024, and the issue proceeds were found to be misappropriated by transferring the issue proceeds to partners/directors of its group entities.