[MUMBAI] Textile and branded apparel company Raymond Ltd on Thursday said a media report alleging "curious transactions" by the Indian firm was "misleading", shortly after their shares dived the most in two years.
The report by BloombergQuint said transactions show that Raymond has been selling goods to a privately held promoter-entity, JK Investors (Bombay) Ltd, only to purchase them back at a higher price.
"All related party transactions are transparently disclosed and are at an arm's length in the ordinary course of business," a Raymond spokesperson told Reuters.
Gautam Singhania-owned JK Investors, handles the secondary packaging of finished goods purchased from Raymond, according to the report.
Singhania is also the chairman and managing director of Raymond Group.
In the last four financial years, JK Investors purchased goods worth 9.93 billion rupees (S$188.1 million) from Raymond and sold them back to the apparel company for about 16.13 billion rupees during the same period, the report added, citing documents filed by JK Investors with the Registrar of Companies, and Raymond disclosures.
In addition to the job work fees of 304.4 million rupees, JK Investors was also paid 228.5 million rupees in sales commission, the report said, adding that this suggested the apparel company was paying the promoter-entity a commission to sell to Raymond.
The apparel company joins a list of Indian firms, including Sun Pharmaceutical Industries and Dewan Housing Finance Corp, whose shares were battered following media reports over corporate governance.
"It looks like there is a serious corporate governance issue here," said Saurabh Jain, assistant vice president, research, SMC Global Securities.
"If this is true, there will be no solace in terms of price correction for Raymond's stock," Jain added.