Mishtann Foods tanked about 20% to its lower circuit price of ₹9.94 on Monday. Last week, the company had been barred by markets regulator SEBI for alleged financial mismanagement.

The Securities and Exchanges Board of had on Thursday restrained five entities, including Mishtann Foods and its promoter and CMD Hiteshkumar Gaurishankar Patel, from the securities markets till further orders for alleged financial mismanagement, fraudulent transactions, and corporate governance lapses.

The regulator also barred Mishtann Foods Ltd (MFL) from raising money from the public as well as prohibited 12 entities, including Hiteshkumar, Navinchandra Patel (CFO), Ravikumar Patel (former CFO) and Jatinbhai Patel (former whole time director) from associating themselves with any SEBI-registered entity or, any listed company or any firm that intends to raise money from the public, until further orders.

SEBI found that MFL has negligible fixed assets on its books and negative cash flow from its operating activity and a very low inventory as compared to its sizeable sale figures during the investigation period and were prima facie found to be fictitious involving circular flow of funds.

Retail shareholder count spikes

SEBI in its interim order also observed the number of public shareholders of MFL has drastically increased from a mere 516 at the end of FY18 to 4.23 lakh by the end of September 2024 quarter.

Hiteshkumar, the sole promoter of MFL, offloaded shares of MFL during July-August period, garnering around ₹50 crore and the promoter holding has been declining since March 2024 quarter.

The regulator noted that Mishtann Foods was found booking fictitious sale/purchase transactions with the group entities and misappropriated its funds amounting to ₹47.10 crore.