Odisha Cement surprised market participants following an illegal transfer of mutual fund units worth Rs 344 crore by the Depository Participant (DP).
In a statement on the exchanges last evening, the company said that certain mutual fund units were “illegally transferred” from the demat accounts of its erstwhile units OCL India and Dalmia Cement East.
Mirroring the shock, shares of Odisha Cement plunged 5 percent intraday on Thursday.
The company said that the matter has been reported to the National Securities Depository Ltd., National Stock Exchange and other appropriate authorities, including market regulator Securities and Exchange Board of India (Sebi).
“The investigation has already been initiated by Sebi and we understand that appropriate actions are being taken including keeping the transfer/ redemption of the said units on hold”, the company said in a release.
The company also filed a criminal complaint with the Economic Offences Wing.
How Big Is Rs 344 crore For Odisha Cement?
Compared to its current market capitalization, the figure appears to be just 1.5 percent but the company held a consolidated debt of about Rs 6,732 as of December, so this amounts to approx. 5 percent of the gross debt number and also approx. 10 percent of its net debt of about Rs 3,496 crore.
Sebi’s Interim Order
A deeper look into the Sebi order tells us that the member transferred mutual fund units belonging to unregistered entities/clients to its client beneficiary account through its three associated firms, viz. Money Mishra Financial Services, Awanish Kumar Mishra and Money Mishra Overseas Pvt.
Sebi also observed that these transferred mutual fund units were used as collateral for F&O margin with its clearing member IL&FS Securities Services Ltd. (‘‘ISSL”) towards trade obligations of the above mentioned associated firms.
Shouldn't This Have Been Disclosed Earlier?
Sebi received a complaint dated February 7, 2019, from Finsec Law Advisor on behalf of its client M/s Dalmia Cement Limited and OCL India Limited alleging fraudulent transfer of mutual funds units worth Rs 344.07 crore by Allied Financial Services Pvt Ltd.
Now the obvious question is: Why Odisha Cement took so long to issue a statement on the exchanges?
Also, why did Odisha Cement subsidiaries, OCL India and Dalmia Cement, provide their mutual fund units to Allied if, as per the SEBI order, it was not a registered client?
Possible Outcomes For Odisha Cement
Shares of Odisha Cement have taken a beating but what comes next for the cement maker?Investors will heave a sigh of relief if the issue gets resolved, but if the amount is not recovered, then it would hit the morale of the shareholders and dent the company’s growth prospects.