(Reuters) - Textile and branded apparel company Raymond Ltd on Thursday said a media report alleging "curious transactions" by the Indian firm was "misleading", shortly after their shares dived the most in two years.
The report by BloombergQuint said transactions show that Raymond has been selling goods to a privately held promoter-entity, JK Investors (Bombay) Ltd, only to purchase them back at a higher price.
Gautam Singhania-owned JK Investors, handles the secondary packaging of finished goods purchased from Raymond, according to the report.
In the last four financial years, JK Investors purchased goods worth 9.93 billion rupees ($139.00 million) from Raymond and sold them back to the apparel company for about 16.13 billion rupees during the same period, the report added, citing documents filed by JK Investors with the Registrar of Companies, and Raymond disclosures.
In addition to the job work fees of 304.4 million rupees, JK Investors was also paid 228.5 million rupees in sales commission, the report said, adding that this suggested the apparel company was paying the promoter-entity a commission to sell to Raymond.
"It looks like there is a serious corporate governance issue here," said Saurabh Jain, assistant vice president, research, SMC Global Securities.
"If this is true, there will be no solace in terms of price correction for Raymond's stock," Jain added.
Shares of the Mumbai-headquartered company dived as much as 11.7 percent in afternoon trade after the market took stock of the media report. Raymond's shares dropped 8.1 percent to their worst close since Oct. 25, 2018.
Stock saw heavy trading volumes - more than 3.9 million shares changed hands, 6.5 times their 30-day average.
($1 = 71.4380 Indian rupees)
(Reporting by Chris Thomas in Bengaluru; additional reporting by Chandini Monnappa; Editing by Sherry Jacob-Phillips)
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