Sebi orders forensic audit of Future Retail’s financials

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    The Securities and Exchange Board of India (Sebi) has ordered a forensic audit of the financials of Future Retail, the company told the stock exchange on Thursday. 

    Future Consumer, a subsidiary, said Sebi has written to Future Retail’s interim resolution professional (IRP) intimating the appointment of Chokshi & Chokshi as the forensic auditors. The chartered accountant firm will look into the consolidated financial statements and account books of the company for the period between March 2020 and March 2022.

    The regulator said the appointment was made under the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations. “Audit of the company will be with respect to related-party transactions with Future Retail only,” Sebi said.

    According to the letter, the forensic audit was initiated as the regulator had reasonable grounds to believe that financial information and business transactions disclosed by Future Retail have been dealt with in a manner that may be detrimental to the interest of investors or the securities market or a person associated with the securities market, and may have violated Sebi’s Securities Contract Regulations Act, or other regulations issued by it.

    In May, Future Retail shareholders and proxy advisory firm InGovern Research Services had written to the markets regulator, demanding prompt action to protect the interest of hundreds and thousands of shareholders and to avoid the company being referred to an insolvency court, which may impact shareholders. 

    “Sebi has taken the right decision to carry out the forensic audit on Future Retail. We have written multiple letters since December 2021. More importantly, it is a huge loss to the public shareholders, including 400,000 retail investors of Future Retail. It was not clear if it was the business loss or if the promoters benefitted from the funds raised from banks. It was necessary that the banks and Sebi essentially should have pursued a forensic audit before taking the company to a dedicated insolvency court. At the end of the day, the interest of minority shareholders is paramount,” said Shriram Subramanian, founder and managing director of InGovern Research Services Pvt. Ltd.

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