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Fully cooperated and provided all documents: Dishman on I-T search

Firm says probe was unanticipated as no prior tax demand notice was received, doesn't foresee adverse outcome; reinstates guidance of 8-10% revenue growth

Vinay Umarji  |  Ahmedabad 

illustration: binay sinha
The company told exchanges on Thursday that I-T officials conducted searches at the company's offices and manufacturing sites.Illustration: binay sinha

Responding to institutional investors on the recently concluded week-long searches by Income Tax (I-T) department, Dishman Carbogen Amcis Ltd has said that it cooperated fully with authorities and provided all documents.

In an call with institutional investors and analysts, Dishman said the I-T searches were unanticipated as it did not receive any prior tax demand notice. The company told investors that it did not expect the investigation to have any adverse outcome on it.

In a filing with the BSE, the company told exchanges on Thursday that I-T officials conducted searches at the company's offices and manufacturing sites.

"The Company has extended full cooperation to officials during the search and provided all the information sought. The search operation was concluded on December 25, 2019. We at Dishman Carbogen Amcis Ltd follow the highest standards of corporate governance and financial discipline. Our systems and processes are benchmarked by competent auditing and accounting standards, our dealings with our partners, investors, financial institutions and our clients are transparent and of the highest Industry standards," the company had stated in its filing.

Commenting on the IT searches, Chairman of Dishman Group, Janmejay Vyas told Business Standard the company now awaits the department's assessment. "We were able to successfully respond to the I-T department's queries due to a robust accounting processes by our team as well as digitised accounts. We now await the department's assessment and will respond accordingly," said Vyas.

In its management call update, broking firm Nirmal Bang said that Dishman attributed automation of accounts for the company being able to immediately address the IT department's data needs. "Transfer pricing and goodwill amortisation were among the few aspects explored during the search operations. With regard to transfer pricing, the company has indicated in most geographies they operate in are at more or less the same tax rate. Like in India they are under MAT (20 per cent), and likewise the tax rate in UK, Switzerland, and Netherlands are also 19 per cent, 20 per cent, and 25 per cent, respectively," according to the broking firm.

The company informed in the call that the IT search did not extend to other promoter group entities nor had any impact on its routine business operations and customer shipments were released on schedule. However, the search operation lasted almost a week as IT officials had follow up requirements of data, which was furnished to their satisfaction.

On Friday, Dishman also responded to the "significant movement" in its stock price in a filing on account of IT searches. "The Company has always been fully compliant and inform to the Stock Exchanges of such information which is required under Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosures Requirements) Regulations, 2015," it stated.

Dishman's stock price has plummeted to Rs 72.1 per equity share by December 24, following reports of IT searches at its offices and manufacturing facilities, from a high of Rs 126 apiece on December 16, 2019.

On the business front, the company reinstated their guidance for 8-10 per cent revenue growth and EBITDA margins around 27 per cent.

According to analysts, the company is seeing its R&D slow down due to a sluggish global economy and US-China disputes. However, it has talked about a robust phase-3 pipeline with 18 molecules, of which four are at the validation stage. This, according to analysts, ensures the company can continue to build its commercial manufacturing revenue stream in the near to medium term.

The largest Vitamin D3 producer, Dishman will continue to build new avenues of growth by investing in capacities, improving process to lower costs and forward integrating to formulations.

In its call with analysts and investors, Dishman has reportedly stated that the company would be adopting the new tax regimen from FY21 onwards which should lower their tax outflow. "The reported tax rate would stand at 25 per cent but the cash outgo would be nil," according to the Nirmal Bang update.

Meanwhile, the company will continue to lower its debt which currently stands at a net of Rs 800 crore, even as the same was lowered by $ 8 million or roughly Rs 57 crore in first six months of FY'20.

On Friday, the company's response to I-T searches led to a marginal 3.59 per cent rise in its stock price to Rs 82.15 per equity share, up by Rs 2.85 apiece.

First Published: Fri, December 27 2019. 18:33 IST
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