An expense of ₹438 crore by Prabhat Dairy Ltd is one of the key focus areas’ for the forensic auditors, who are looking into the books of the company, sources familiar with the matter told Business Line.

SEBI recently ordered a forensic probe after investor complaints piled up against the company promoters accusing them of ‘financial bungling.’ Grant Thornton has been appointed for the audit.

Sells new biz to Lactalis

Prabhat Dairy had sold its fresh milk business in April 2019 to French firm Lactalis for ₹1,700 crore. In December 2019, it made a proposal to the stock exchanges to de-list. However, it has also claimed major expenses in its deal, which some shareholders say is an excuse to keep the delisting offer price low.

The company has 16,000 retail investors. The company has also not filed its results after December 2019.

SEBI has held back the company’s delisting application for more than seven months. The full market-cap of Prabhat Dairy is around ₹700 crore, despite the fact that its deal alone to sell a large segment of its business gives the company ₹1,700 crore.

Prabhat Dairy had managed to raise ₹485 crore in its initial public offering in 2016. Nearly 50 per cent of shareholding in the company is with the public. As per a recent statutory filing by Prabhat Dairy, the company is showing “estimated transaction costs and taxes” on sale of shares and business sale, even 1.5 years after striking the deal. The company has shown ₹204 crore as indemnity, for claims arising in future and ₹234 crore as ‘management estimate’ of taxes. Both of these are being examined by the forensic auditors, the sources said.

The shareholders want the auditor and SEBI to do a detailed probe about all the expenditures claimed by the company including the receipts of the tax worth ₹234 crore and indemnity amount of ₹204crore.

Gets nod for delisting

The company did not comment on the probe on its expenses but said, “The company does not comment on speculations. Requisite disclosures related to the audit have been made by the company to exchanges. Company has sought a shareholder vote regarding the delisting offer made by promoters and already secured 99 per cent voting in favour of the resolution, which includes all institutional investors. Once we receive delisting approvals shareholders will have an opportunity to exit as a price discovered through reverse book building.”

The institutional investors of Prabhat Dairy include Ontario Pension Board, Mondrian Investment Partners, Sundaram Alternate Opportunities Fund, Mondrian Emerging Markets Fund, India Agri-business Fund and Societe De Promotion amongst its top public shareholders.

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