Newsmakers of D-Street

Market regulator Sebi has disposed of adjudication proceedings against Prime Focus Limited and its directors after concluding that the company had followed the correct accounting treatment while transferring business divisions to its indirect subsidiaries.

In an order dated June 16, Sebi’s adjudicating officer Amit Kapoor held that allegations of misleading financial statements, accounting irregularities and violations of listing and anti-fraud regulations were not established.

The case stemmed from Sebi’s investigation into transactions undertaken by Prime Focus during FY20 and FY22. The company had transferred its visual effects business division to DNEG Creative Services and later sold its post-production services business to DNEG India Media Services, both indirect subsidiaries under common control.

Sebi investigation had alleged that these transactions resulted in gains of Rs 200.27 crore in FY20 and Rs 250.20 crore in FY22, which significantly boosted the company’s reported profits and net worth. The regulator had questioned whether Prime Focus should have applied accounting provisions under Ind AS 103 governing business combinations under common control.

According to the investigation, without the gain from the VFX business transfer, Prime Focus would have reported a consolidated loss of Rs 267.83 crore in FY20. Similarly, the FY22 post-production services transfer contributed Rs 250.20 crore to profits, accounting for a substantial portion of the company’s reported earnings for that year.

However, the adjudicating officer disagreed with the allegations.

The order noted that Appendix C of Ind AS 103 applies to the acquirer or transferee in a common-control transaction and not to the transferor selling the business. Since Prime Focus was the transferor and not the acquiring entity, the accounting provisions cited by Sebi investigation team were found to be inapplicable.

The order further observed that Prime Focus had accounted for the transactions under Ind AS 16 and Ind AS 38 relating to the sale of property, plant and equipment and intangible assets. The gains were recognised as the difference between disposal proceeds and carrying value of assets and were disclosed as exceptional items rather than revenue.

“The Noticee has followed correct accounting treatment in its standalone financial statements,” the adjudicating officer said.

The order also rejected allegations relating to consolidated financial statements. It found that gains arising from intra-group transactions had been eliminated during consolidation in accordance with Ind AS 110 requirements.

The adjudicating officer noted that the company’s statutory auditors had not issued any qualification regarding the accounting treatment or consolidation process.

Sebi had also questioned the timing of receipt of sale proceeds, noting that a substantial portion was received after the regulator initiated its investigation. However, the order stated that there was no evidence of fund rotation among group entities or any indication that the transactions were not genuine.

The order also cleared nine noticees, including promoter-directors Naresh Malhotra and Namit Malhotra, Chief Financial Officer Nishant Fadia and independent directors who served on the company’s audit committee.

Sebi said the allegations against the individual directors were derivative in nature and based entirely on the primary charge that Prime Focus had violated accounting standards and published misleading financial statements. Since the principal allegations against the company failed, the charges against the directors could not survive independently.

Accordingly, the adjudication proceedings initiated through a show-cause notice issued in December 2023 have been disposed of.

Suzlon Energy plans to challenge a recent Sebi order that imposed penalties of nearly Rs 29 crore on the company and several former executives over alleged accounting and disclosure violations. In an exchange filing, Suzlon said it intends to file an appeal before the Securities Appellate Tribunal (SAT) against the regulator’s order dated May 29.

“The findings of Sebi in the said order are related to the financial statements of the company from FY14 to FY18. The company will be filing an appeal before the Securities Appellate Tribunal in respect of the Sebi order,” the company said.

The development comes a day after Sebi imposed penalties on Suzlon and a number of former senior executives following a long-running investigation into the company’s historical financial reporting practices.

The market regulator levied a penalty of Rs 15.95 crore on Suzlon, while former executive Vinod R Tanti was fined Rs 5.75 crore and Girish R. Tanti was penalised Rs 5.45 crore. Former group CFO Kirti J. Vagadia was fined Rs 1.5 crore, while former CFO Amit Agarwal was directed to pay Rs 30 lakh.

Sebi action followed a forensic audit and investigation covering multiple financial years after the regulator received a complaint alleging irregularities in dealings involving subsidiaries and associate entities.

The regulator concluded that certain transactions between Suzlon and its subsidiaries had the effect of overstating profits and strengthening the appearance of the company’s financial position.

Among the issues examined were transfers of businesses and investments among group entities, accounting treatment of contingent liabilities, impairment reversals and disclosures made in financial statements.According to Sebi, some transactions involving subsidiaries resulted in substantial accounting gains being recorded without reflecting the underlying economic reality of the arrangements. The regulator also questioned the treatment of certain liabilities and fund flows between group entities, concluding that the company’s disclosures did not present a true and fair picture of its financial position during the period under review.

Sebi said accurate financial statements are critical because investors rely on them while assessing the health and prospects of listed companies. The regulator held that the violations warranted monetary penalties under provisions relating to disclosure norms, listing regulations and fraudulent and unfair trade practices.

Suzlon, however, has now moved to contest the findings before the appellate tribunal.

The company has undergone a significant turnaround over the past few years after overcoming a prolonged debt crisis and has emerged as one of the biggest beneficiaries of India’s renewable energy push. It recently reported strong operational performance and remains one of the country’s largest wind energy equipment manufacturers.

The appeal before the SAT will determine whether the regulator’s findings and penalties are upheld, modified or set aside. Until then, the Sebi order remains in force.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times.)

Shares of India’s private lender fell for a second session in a row, now down 5% in two sessions after a newspaper report said that the lender’s Audit Committee had ordered a formal “Internal Vigilance Investigation” into payments totalling Rs 45 crore to a PSU disguised as marketing spend.

The lender issued a clarification stating: We wish to state that in line with the highest corporate governance standards of the Bank, the Internal Audit function conducts reviews, identifies and presents its observations from time to time. As such, the observations of Internal Audit function are comprehensively addressed by the Bank and that applies to the matter in question.

“HDFC Bank continues to maintain sound financial and risk management practices, with robust systems of internal control and oversight. We remain committed to the highest standards of corporate governance and regulatory compliance,” the regulatory filing added.

A report in The Indian Express said the payments were allegedly made to the Maharashtra State Road Development Corporation (MSRDC), a state government agency, just days before former chairman Atanu Chakraborty resigned on March 18.

This order came after an internal audit of the bank’s marketing department, covering the FY25 period, flagged these payments and rated the department’s performance as “unsatisfactory,” the report said.

The Indian Express investigation, based on internal records, found that the payments were intended for Maharashtra State Road Development Corporation as “differential interest”, or interest paid above the specified rate on its deposits. However, instead of being directly credited to MSRDC’s account as interest income, the funds were allegedly routed through the bank’s marketing department and shown as contributions towards a road safety awareness campaign via four local vendors.

Records reviewed during the probe also indicate that the payout was approved during senior-level discussions attended by Sashidhar Jagdishan. According to testimonies by several officials in the internal investigation, Jagdishan participated in calls convened to examine ways the bank could compensate MSRDC and was part of the decision to route the differential interest through the marketing budget as a one-time arrangement.HDFC Bank Chief Marketing Officer Ravi Santhanam acknowledged in his testimony during the Vigilance probe that the marketing department acted as a “facilitator to camouflage differential interest reimbursement as marketing spend”.

Significantly, the Vigilance probe report was sent to two top committees: Audit Committee of the Board (ACB) on April 10, and the Nomination and Remuneration Committee of the board a week later, the media report said.

On March 18, part-time Chairman and independent director Atanu Chakraborty tendered his resignation. In his letter, Chakraborty pointed to certain developments and practices within the bank over the past two years that did not align with his personal values and ethics. “This is the basis of my aforementioned decision,” he wrote.

Since the development, HDFC Bank shares are down nearly 8%. The stock has slipped 23% in 2026.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

A decline in promoter shareholding can have multiple interpretations. While it may reflect fundraising for expansion or other strategic purposes, it can also raise concerns among investors about alignment between promoters and minority shareholders. In the NSE midcap universe, we highlight 13 stocks where promoter holdings declined in the March 2026 quarter compared to the December 2025 quarter, based on StockEdge shareholding data.

Mumbai | New Delhi: HDFC Bank on Thursday sought to reassure investors and stakeholders after its locally listed stock slumped the most intraday since the first Covid week, asserting that there are no material issues at the bank where the non-executive chair abruptly exited last night after citing ‘ethical’ misalignment with the management.

“On behalf of the board and in full alignment with the executive leadership, I wish to assure all stakeholders that there are no material matters at this point in time,” said Keki Mistry, interim chairman of HDFC Bank, during a media call.

Mistry added that despite repeated requests from board members, exiting chairman Atanu Chakraborty did not specify any concerns that prompted him to exit 14 months before the end of his second term.

The incoming interim chairman, a veteran at the mortgage lender Housing Development Finance Corp, the erstwhile parent of the lender, stressed his personal commitment to help rebuild trust in a bank that has the second-biggest depositor base in the country.

“At the age of 71, I would not have taken on this responsibility if the bank’s governance standards and ethos were not aligned with my values,” Mistry said.

He added that relationship issues could have played a role in the exit of his predecessor. “I think, to my mind, there could be a relationship issue between him and the management. That may have manifested over a period of time.”

HDFC Bank’s stock fell 5.13% to close at ‘799 per share, having plunged to ‘770 apiece early morning. ‘Robust’ Credentials
The Centre, meanwhile, stressed the lender’s fundamentals to demonstrate its alignment with the satisfactory regulatory view on the bank, the biggest by market value.

“HDFC Bank is a strong institution with strong fundamentals,” Financial services Secretary M Nagaraju said, adding that the banking regulator had already issued a statement on its assessment of the lender.

CEO Sashidhar Jagdishan, whose second term is due to end in October, signalled a larger role for Kaizad Bharucha, the current deputy managing director, during the management call.

“He handles the asset business of the balance sheet, which reflects the respect and stature he commands within the organisation, both at the board and at the management level,” Jagdishan said. “So, that will continue. In fact, he will only get more responsibilities as we move forward.”

Mistry added that the Nomination and Remuneration Committee (NRC) will meet within the next month to recommend the appointment of the managing director and CEO to the Reserve Bank of India, a move that could help remove any overhang around the reappointment of CEO Jagdishan.

Chakraborty, who had been on the board since May 2021 and was serving his second term, resigned with immediate effect, stating that certain developments over the past two years were not in line with his personal values and ethics.

Accent on ‘Trust’
Mistry said the board and management are united and will work to address any concerns and restore confidence. “The management will be engaging with major shareholders over the next couple of days to address any fears. I do not believe there is any governance-related issue in the bank,” he said.

Mistry also added that the banking regulator has not flagged any issues requiring corrective action after this incident.

Board member Renu Sud Karnad said Chakraborty was repeatedly asked to elaborate on his remarks but declined to provide details.

“If there was anything, we would have corrected it. Each time we asked, his response was that there was nothing specific, which is what was baffling,” she said on the media call.

During the same call, Jagdishan explained the sequence of events leading up to the abrupt resignation. During the board meeting, he said, members attempted to persuade Chakraborty to reconsider or elaborate on his concerns.

As developments unfolded, a group of directors, including two whole-time and two independent members, met officials of the RBI later on Wednesday evening to brief them on the situation.

Jagdishan said the regulator was supportive, as reflected in the swift approval of the interim chairman, indicating confidence in the bank’s board, management, and the overall franchise.

The spate of resignations continued at Gensol Engineering as two independent directors, Harsh Singh and Kuljit Singh Popli, stepped down from their positions. This came a day after promoters Anmol Singh Jaggi and Puneet Singh Jaggi offered to step down.

The resignations come as the regulator barred the promoters from the securities market, citing serious financial misconduct.

Both the directors mentioned that recent events have pained them immensely and it is unfortunate that they had to resign in such difficult circumstances.

In an interim order, Sebi said there is a “complete breakdown” of corporate governance at Gensol, a renewable energy and electric vehicle (EV) firm.

The regulator accused the promoters of treating the listed company like a “personal piggy bank,” diverting funds for luxury purchases, including a high-end apartment in Gurgaon’s DLF Camellias and a Rs 26 lakh golf set.

The regulator’s probe, triggered by a June 2024 complaint, found that Gensol misused Rs 977.75 crore in loans from IREDA and PFC, meant for buying 6,400 EVs. Only 4,704 vehicles were purchased, leaving over Rs 207 crore unaccounted for.Funds were allegedly funneled to promoter-linked entities like Go-Auto and Capbridge Ventures, with some used for personal expenses.Gensol Engineering said it will fully cooperate with the forensic audit to be conducted at the behest of Sebi. The regulator will appoint a forensic auditor to thoroughly examine the books of accounts of the company and its related entities.

The turmoil at Gensol threw the spotlight on corporate governance in India, where Sebi chief Tuhin Kanta Pandey Thursday said it is essential to protect shareholder interests, particularly those of minority shareholders.

Speaking at a CII conference, Pandey said for listed companies, robust governance mechanisms are essential for enhancing investor confidence through transparent disclosures, board independence, and effective oversight.

Pandey further noted that Sebi will continue to expect a higher bar on governance, but the true and lasting change must come from within the corporate boardrooms.

In its latest board meeting, capital markets regulator Sebi approved a series of key measures aimed at protecting investor interest and improving various aspects of market regulations. From tightening SME IPO norms to easing certain reporting requirements, here are 10 key changes you need to know.

1. Stricter rules for SME IPOs

Sebi has made it mandatory for companies planning to tap the SME IPO market to show operating profits of Rs 1 crore in at least two of the last three financial years. Further, promoters and other major stakeholders selling under the OFS have been capped up to 50% of their holdings during the IPOs.

The regulator has also reined in on the misuse of IPO proceeds by approving funds that cannot be used for repaying loans taken from promoters, directors, or related parties.

Further, Sebi said that the allocation methodology for non-institutional investors (NIIs) in SME IPOs to be aligned with methodology used for NIIs in mainboard IPOs

2) Review of merchant banker regulations

Under the new norms approved by Sebi, merchant Bankers, other than banks, public financial institutions and their subsidiaries, will undertake only permitted activities. These bankers may carry out other regulated activities as a separate business unit after obtaining registration from the respective regulatory authority.Other changes for merchant bankers include maintaining a liquid net worth of at least 25% of the minimum net worth requirement, at all times and an underwriting limit prescribed as 20 times of liquid net worth.

3) Relaxation in ESG reporting

Sebi has relaxed norms related to ESG reporting where companies now have more time to comply with ESG reporting. Mandatory reporting of value chain data has been deferred by 1 year to FY26, and it will remain voluntary until then.

4) Regulated entities responsible for use of AI

During the board meeting, Sebi has also approved tweaking rules related to artificial intelligence, where it assigned the responsibility of using the AI tools to market infrastructure institutions, registered Intermediaries and other persons regulated by Sebi.

Sebi said regulated entities including brokers and AMCs are responsible for the privacy and security of stakeholders’ data and also the output arising from the usage of such tools.

5) Simplified debt listing rules

Sebi has eased norms for listing debt securities, making it easier and faster for companies to raise funds through bonds. The measures include mandating listed or to be listed debt instruments issuance and its transfer only in demat form.

6) Strengthening corporate governance

SEBI has introduced stricter rules to enhance corporate governance standards. Companies will need to disclose more details on related-party transactions and the use of funds, ensuring greater transparency for investors.
Sebi board approves stricter rules for SME market, including financial stability before IPOs

7) Amendment to mutual funds norms

Sebi has approved amendments to rules that specify timelines for deployment of funds collected by mutual funds in new fund offers (NFO).

The objective of the framework is to provide a timeline within which the fund manager would be required to deploy the funds garnered in an NFO as per the required asset allocation of the scheme.

The new framework is aimed at encouraging AMCs to collect only as much funds in NFOs as can be deployed in a reasonable period of time, since in the open-ended funds investors always have the option to enter the scheme at a later date at the prevailing NAV.

The framework also provides an option to investors to exit the scheme without exit load in case the fund manager is unable to deploy the fund within the specified timeline.

8) Investor protection for REITs and InvITs

Sebi approved reforms to strengthen investor protection for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These include better disclosures and mechanisms for safeguarding investor money in these asset classes.

9) Regulations for startups

Sebi has relaxed eligibility norms for startups listing on the innovators growth platform (IGP). Startups now need only 25% of pre-issue capital to be held by qualified investors, making it easier for them to list and raise funds.

10) Alternative Investment Funds (AIFs)

AIFs will now need to provide detailed quarterly disclosures on their investments, valuations, and performance, helping investors track their money more effectively.

Enhanced surveillance of trading platforms

To prevent market manipulation, Sebi has introduced stricter surveillance mechanisms for trading platforms. This includes real-time monitoring of suspicious trades and stronger penalties for entities found violating market norms.

Suzlon Energy has been issued an advisory cum warning letter from both the National Stock Exchange (NSE) and BSE Ltd, regarding non-compliance with the Securities and Exchange Board of India (SEBI) Listing Obligations and Disclosure Requirements.

These warnings are issued in respect to the company’s handling of disclosures related to the resignation of Independent Director, Marc Desaedeleer, regulatory filing by the company said.

On June 8, 2024, Marc Desaedeleer, an independent director of Suzlon Energy’s board, resigned.

“It was observed that the disclosure for the resignation letter of the independent director didn’t have any confirmation for the material reason, however, the company in its disclosure had provided such confirmation,” BSE and NSE mentioned in their warning letters.

Desaedeleer’s resignation letter pointed out lapses in corporate governance.

“The details related to names of listed entities in which the resigning director holds directorships, indicating the category of directorship and membership of board committees, if any, was not provided in the said disclosure,” the exchanges added.Moreover, the company also failed to inform the exchanges promptly about an analyst call held the next day.SEBI mandates that companies must inform stock exchanges of such events at least two working days in advance.

In the advisory, the NSE and BSE stressed the importance of adhering to corporate governance best practices and SEBI regulations, warning Suzlon to exercise greater caution and ensure compliance in future disclosures. The exchanges further warned that any further lapses would result in stricter actions.

Suzlon said there is no material impact on the financial, operation, or other activities of the company.

The scrip ended at Rs 79.73, down 0.45% on the BSE on Tuesday.

In a recent regulatory development, the Securities and Exchange Board of India (SEBI) introduced an amendment aimed at bolstering corporate governance by enhancing the accountability of independent directors (IDs). This crucial change mandates that when an independent director resigns, they must provide a resignation letter explicitly stating the reasons for the exit, with a stipulation that there should be no other reason beyond what is mentioned in the letter.

The fundamental concept behind the appointment of Independent Directors (IDs) is to introduce a vital balance into decision-making processes within companies. Central to this notion is the idea that IDs bring an unbiased view and a commitment to ethical standards. Moreover, it is imperative that IDs are not merely passive participants in boardroom discussions but active contributors whose voices are valued and heard. This necessitates a culture where IDs feel empowered to express their viewpoints, raise concerns, and articulate their expectations regarding governance, transparency, and ethical conduct. Having said this the amendment now mandates that independent directors must provide explicit reasons for their resignation in the letter.

The rationale behind this amendment was to address a recurring issue where independent directors would resign citing reasons such as “personal commitments,” raising suspicion and concerns about compliance. Resignation of IDs without accurate reasons left the regulators guessing reasons for the same. The watchdog has now compelled independent directors to specify reasons for their resignation, thereby bringing to light critical issues.

The market’s watchdog in the past has gone blazing guns at independent directors by levying penalties ranging from monetary to debarment in capital markets for failure in exercising due diligence. Some popular names include Jai Mata Glass Limited, Securekloud Technologies Limited, Sanwaria Consumers Limited.

Instead of providing generic reasons IDs are now obligated to delve deeper into the underlying issues prompting their departure. By shedding light on specific concerns such as non-compliance with regulatory requirements, questionable transactions, inadequate disclosures, or governance lapses, independent directors are shedding light on issues that may have previously gone unnoticed or ignored.

This evolving landscape of mandating reasons in resignation letters from independent directors becomes more exhaustive than ever before and aids in inspection, inquiry, and investigation to regulators. Parallelly these letters serve as crucial defense mechanisms for IDs, providing a comprehensive account of their departure reasons and asserting that these reasons are exhaustive. In the event of investigations or inquiries, such letters act as a shield, offering immunity to IDs by documenting their rationale transparently. These safeguard IDs who meticulously detail their reasons will be exonerated from liability.A notable outcome of this amendment is the proactive role assumed by independent directors in safeguarding shareholder interests and upholding corporate integrity. Recent cases, including the Zee case, exemplify how independent directors, upon resigning, have cited concerns such as unjustified related-party transactions (RPTs) which were not at arm’s length, dubious valuations, or lack of satisfactory responses from management, prompting SEBI to initiate investigations that may eventually uncover instances. Another classic example was PTC Financial Services Ltd where independent directors resigned citing corporate governance lapses.The impact of this regulatory intervention has been overwhelmingly positive. It has not only facilitated timely regulatory interventions to protect shareholder interests but has also instilled confidence in the efficacy of corporate governance mechanisms.

Having said this to my mind it is the test of ID’s wisdom as to when they rely on trust and when they take a call to dig deeper to inspect and accordingly decide upon further action and if need be, put forth a detailed resignation.

The significance of this regulatory change extends beyond mere procedural compliance; it signifies a paradigm shift towards proactiveness. By requiring them to disclose specific reasons for resignation and encouraging them to escalate governance concerns to regulatory authorities, it has fostered a culture of accountability and integrity within boardrooms.

In another notable stride towards reinforcing corporate stewardship, independent directors are now mandated to provide a comprehensive account of their resignation history from board positions within the preceding three years. This requirement underscores the heightened scrutiny surrounding ID appointments and emphasizes the profound responsibility and accountability associated with such roles. No longer can resignations be discreetly executed without repercussions; instead, IDs must meticulously consider their suitability for board positions, fully cognizant that their past resignations will be subject to thorough examination. This directive serves as a clear indication that IDs must approach their positions with utmost seriousness and diligence, recognizing the significant impact of their decisions on organizational governance and integrity.

The amendment mandating clear resignation disclosures by independent directors marks a significant milestone in strengthening corporate governance practices in India. It emphasizes the critical role of independent directors as custodians of corporate integrity and ensures that governance lapses are promptly addressed, ultimately fostering investor confidence and market integrity.

(The author is the founder of MMJC and Associates – Mumbai-based corporate compliance firm)

Capital markets regulator Sebi (Securities and Exchange Board of India) has extended the timeline for mandatory verification of market rumours by listed entities.

Sebi regulations mandate that top 100 listed entities by market capitalisation must verify, confirm, deny or clarify market rumours from October 1, 2023. This has now been extended to February 1, 2024.

Similarly, the top 250 listed entities were to mandatorily verify and confirm, deny or clarify market rumours with effect from April 1, 2024, which now stands extended till August 1, 2024.

“It has been decided to extend the effective date of implementation of the provisions for top 100 listed entities by market cap to February 1, 2024 and for top 250 listed entities to August 1, 2024,” a Sebi statement noted.

Currently, some of the largecap companies on a voluntary basis file to exchanges, clarifying various rumours related to acquisitions or appointments etc., Mostly, this relates to various news reported in the mainstream media.

If the listed entity confirms the reported event or information, it must also provide the current stage of such event or information.

Sebi had in March this year approved a proposal to verify market rumours to strengthen corporate governance and disclosure framework. The move was based on the recommendations made in three consultation papers released by SEBI between November 2022 and February 2023.Prior to this, listed entities had it upon themselves to verify and respond to market rumours.

The decision to mandatorily verify rumours was taken to protect investors and stakeholders as potential misinformation can influence market sentiments.

By making it mandatory for companies to respond to rumours, the move was also aimed at increasing transparency and maintaining a level-playing field for listed entities. However, some companies felt, this would increase the compliance burden.

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