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Austral Coke- Another example of bad Corporate Governance practice


Well, with Satyam issue coming to an almost end, there seems to be a new scandal unfolding, and
this time too, the issue seems to be that of falsification of accounts. The striking feature is that the group involved is again a well known one, and the company Austral Coke got listed just last year.

The Details

Securities and Exchange Board of India (Sebi) has barred Austral Coke and Projects Ltd from raising further funds from the capital market till further orders. The regulator would pass further orders after the income tax department unearths serious irregularities in the accounts books of the company.

The Securities and Exchange Board of India (Sebi) on late Tuesday passed an interim ex-parte order barring Kolkata-based Austral Coke and Projects from raising further capital, for allegedly falsifying accounts of over Rs 1,000 crore and diverting money raised from last year’s IPO.

Austral had raised Rs 142 crore through an IPO in August last year, and the company’s board was to meet on Thursday to discuss a proposal to raise $200 million through a qualified institutional placement. Rating agency CARE had assigned a “Grade 2” to the Austral IPO last year, indicating below-average fundamentals.

An investigation by the income tax department on the residential and business premises of Austral Group revealed that the company has shown bogus purchase and sales worth Rs 553 crore and Rs 495 crore, respectively, in the accounts books of the company.

According to the findings of the Ahmadabad I-T department, the company purchased raw material worth Rs 553 crore, plant and machinery from 29 nonexistent firms, with a certain Ajitkumar Jindal being the common promoter. Mr Jindal admitted to having provided bogus bills for the purchase of raw material as well as plant and machinery to the company.

AUSTRAL had also shown sales of around Rs 495 crore to the entities floated by Mr Jindal and to other concerns having the same address as the firms of Mr Ajitkumar Jindal which, apparently, were bogus.

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If one is to consider the recent announcements, then in the last two months there have been a slew of announcements regarding the expansion programme of the company, and also purchase of interests in various mines across Mozambique. But, if the findings of IT department come out to be true, then there will be serious questions regarding as to what is the present situation of assets of the company.

In the case of Austal Coke, the saying, “The more tenuous the enterprise, the more optimistic the rhetoric is going to be”, seems to be coming true.

There are many companies in the small, mid and large segment, where we have obvious concerns regarding the poor corporate governance practice. Although we try and cover such companies through our postings, but its not always possible to put in all data through an article.

Here I would like to mention, that we send regular mail communication to our subscribers to safeguard their interest and their hard-earned money. We provide them the complete details based on the input from our reliable sources and caution them against making an investment in such companies.


To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

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