Sebi orders forensic audit of debt-ridden Future Retail accounts

Stock market regulator Sebi has ordered a forensic audit of the accounts of debt-ridden Future Retail Ltd (FRL) for the financial years 2019-20, 2020-21 and 2021-22.

The Securities and Exchange Board of India (Sebi) has also asked for an audit of FRL's Related Party Transactions (RPT) with three other Future group firms -- Future Enterprises Ltd, Future Consumer Ltd and Future Supply Chain Solutions Ltd.

RPT refers to a deal or arrangement made between two parties related to each other by having a pre-existing business relation or common interest.

In their respective regulatory filings, the three Future group firms informed the exchanges that they have received a letter from Sebi on August 3, 2022, addressed to the Interim Resolution Professional of FRL intimating about the appointment of Choksi & Choksi LLP as a forensic auditor.

This is with respect to "consolidated financial statements of FRL and audit of the books of accounts of the company and some other entities for review period being financial years ended 31st March 2020, 31st March 2021 and 31st March, 2022", Future Enterprises said in its regulatory filing.

The audit will be "with respect to the related party transactions with FRL during the above review period", said the three Future group firms.

They have also assured their cooperation with the forensic auditors during the audit process.

While mentioning the reason for initiating a forensic audit, Sebi in its letter said it has "reasonable grounds to believe that the disclosure of financial information and the business transactions in the matter of FRL have been dealt with in a manner which may be detrimental to the interest of the investors or the securities markets and/or an intermediary or a person associated with the securities market...".

It may have violated provisions of the SEBI Act, Securities Contracts (Regulation) Act, 1956 ('SCRA Act'), SEBI (PFUTP) Regulations, 2003 and the provisions as specified in Section 24 of the Companies Act, 2013 or any other Rules or the Regulations made or directions issued by Sebi there under, the letter added.

Last month, the Mumbai bench of the National Company Law Tribunal (NCLT) had ordered to initiate an insolvency proceedings against FRL after admitting the plea of the Bank of India.
Suspending the board of FRL, NCLT appointed an IRP (Interim Resolution Professional) and put the company under moratorium.

All four Future group firms were part of the 19 group companies operating in retail, wholesale, logistics and warehousing segments, which were supposed to be transferred to Reliance Retail as part of a Rs 24,713-crore deal announcestd in August 2020.

The deal was called off by billionaire Mukesh Ambani-led Reliance Industries Ltd in April after it failed to get support from lenders' of the respective companies.

Following this, the Kishore Biyani-led retail empire is in deep financial trouble.