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Market regulator Sebi bars Suumaya Industries' promoters for alleged fraud

The promoter members, including Ushik Gala and Ishita Gala, held key positions such as managing director (MD) and chief executive officer (CEO) at different intervals

SEBI

Khushboo Tiwari Mumbai

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The Securities and Exchange Board of India (Sebi) on Friday debarred four individuals from the promoter group and management of Suumaya Industries (SIL) from accessing the market for allegedly manipulating financials, engaging in fraudulent transactions, and diverting funds.
 
The promoter members, including Ushik Gala and Ishita Gala, held key positions such as managing director (MD) and chief executive officer (CEO) at different intervals.
 
In an ex-parte order-cum-show-cause notice issued on Friday, Sebi also barred Ushik from holding any directorial post or key position in any listed company or Sebi-registered intermediary.
 
Sebi’s findings indicate that the company allegedly inflated financials, booked fictitious sales and purchases, and engaged in other malpractices.
 
 
For instance, in one such transaction, the company reported net sales worth Rs 3,365 crore to an entity but received only Rs 29.39 crore, with the dues later shown as ‘nil’ in the books. The Sebi order highlights multiple such transactions.
 
The company had reported a significant jump in financials from Rs 2,448 crore in FY21 to Rs 6,754 crore in FY22.
 
The market regulator noted that in FY21, the cost of materials consumed by SIL rose sharply to Rs 2,071.87 crore from Rs 191.88 crore in FY20. This figure further surged to Rs 5,762.81 crore in FY22.
 
The higher costs were primarily attributed to purchases for the agro-commodity and textile businesses.
 
However, during this period, the company’s cash flows from operations were a very small percentage of the recorded revenue.
 
In FY21 and FY22, cash flow from operating activities constituted only 0.39 per cent and 0.10 per cent, respectively.
 
During this period, the company’s shares experienced an exceptional surge from Rs 62.25 apiece in October 2020 to a peak of Rs 701.8 in July 2021. By March 2023, the shares had declined to Rs 11 apiece, and as of Friday’s closing, they were trading at around Rs 3.5.
 
The Sebi order notes that the promoter group and its members also executed significant off-market transactions. This was to divest equity shares before the substantial decline in the company’s share price.
 
“SIL’s senior management, aided by the inaction of the audit committee, created an environment where deception thrived. Regulatory norms were flouted, and investor trust was trampled upon,” stated Sebi whole-time member Ashwani Bhatia, in the order.

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First Published: Jan 24 2025 | 8:30 PM IST

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