Avantha Group company CG Power and Industrial Solutions Ltd said on Tuesday it has detected unauthorised transactions and financial irregularities by some employees.
The company said in a stock-exchange filing that some current and past employees, including senior executives, carried out certain transactions it hadn't authorised.
"These transactions appear to be undertaken in a seemingly fraudulent manner and, hence, warrant further detailed investigation," it said.
The disclosure led to a selloff in the company's shares. The shares fell by the maximum permissible limit of 20% to Rs 14.75 apiece on the BSE.
This also led to a 7.3% decline in the shares of Yes Bank, which holds a 12.8% stake in CG Power. While CG Power is still part of Gautam Thapar-led Avantha Group, the promoters hold a negligible stake in the company. Apart from Yes Bank, a bunch of financial institutions own a large stake in company. Another key shareholder is Bharti Group, led by billionaire Sunil Mittal.
CG Power also said that these transactions appear to have been carried out by various means including inappropriate netting off, using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliate companies and other connected parties. "These may have potentially resulted in misstatement of past financial statements."
The company said it had informed about the transactions to an operations committee, set up to conduct a financial analysis and refinance debt. It also informed the committee about a letter the company received from a financing firm with regard to interest payment failure, the company said, adding that the committee was unable to trace that transaction.
The electrical equipment maker also said that its total liabilities may have been “potentially understated” by around Rs 1,053.54 crore for the financial year ended March 2018. The total group liabilities may have been understated by Rs 1,608.17 crore.
Similarly, advances to the company's related and unrelated parties may have been understated by Rs 1,990.36 crore on a standalone basis and Rs 2,806.63 crore at the group level as of March 2018.
Moreover, some assets were provided as collateral for loans and the money received from it was allegedly siphoned off, the company said.
The company’s board will conduct a forensic investigation to establish the accountability for the transactions. It did not disclose the identity of the law firm involved in the investigation.