The Ministry of Corporate Affairs has ordered an inspection of the books of Edelweiss Asset Reconstruction Co following accusations of fund diversion, a charge denied by the company.
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Edelweiss Financial Services share price was locked at 5 percent lower circuit on March 18 after the Ministry of Corporate Affairs (MCA) ordered an inspection of the books of Edelweiss Asset Reconstruction Co (EARC).
There were pending sell orders of 54,990 shares, with no buyers available.
The MCA has ordered an inspection of the books of EARC after a whistleblower wrote to the Prime Minister’s Office (PMO) and the Reserve Bank of India (RBI) alleging fraud at the firm.
The whistleblower—Paras Kuhad, a former additional solicitor general of India—has alleged that Edelweiss Group, the controlling shareholder of the asset reconstruction company along with its partner Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), diverted at least Rs 1,800 crore from EARC. Kuhad and his family own about 14 percent in EARC, which manages Rs 45,000 crore in assets.
Edelweiss ARC strongly denied the all wrongdoing and said it was following all laws in letter and spirit. CDPQ did not respond to mails seeking comment.
An inspection of books does not mean a firm is guilty of violating the law. It is only the first step of a process in which an investigating officer records statements of company officials. Based on the findings, the ministry can decide if the probe needs to end or a further examination by it or the Serious Fraud Investigation Office is called for.
Moneycontrol has reviewed a copy of the letter from the MCA to its Mumbai branch ordering the inspection, citing the whistleblower complaint received through the PMO.
Edelweiss Financial Services Ltd is a diversified financial services company, providing investment banking, institutional equities, private client broking, asset management and investment advisory services It also extends wealth management, insurance broking and wholesale financing services to corporate, institutional and high-net worth individuals.
At 1007 hours, Edelweiss Financial Services was quoting at Rs 80.20, down Rs 4.20, or 4.98 percent on the BSE.
The share touched a 52-week high of Rs 91.70 on March 16, 2021 and a 52-week low of Rs 29.90 on March 26, 2020. It is trading 12.54 percent below its 52-week high and 168.23 percent above its 52-week low.
