Description

SEBI settlement order against Kalyani Steels Limited, BF Utilities Limited, and Mrs. Deepti R Puranik for alleged fund diversion and misuse through investments in promoter group companies with nil operations and negative net worth.

Summary

SEBI issued Settlement Order No. SO/JS/DP2025-26/7871-7873 against Kalyani Steels Limited (KSL), BF Utilities Limited (BFUL), and Mrs. Deepti R Puranik (Compliance Officer and Company Secretary of KSL) following an investigation into alleged misuse and diversion of funds through investments in promoter group companies. The investigation, spanning FY 2009-10 to FY 2021-22, was initiated based on an NSE examination report dated March 20, 2023.

Key Points

  • Settlement applications filed by all three applicants: KSL (App. No. 7872/2024), BFUL (App. No. 7873/2024), and Mrs. Deepti R Puranik (App. No. 7871/2024)
  • NSE examination report (March 20, 2023) identified that three Kalyani Group listed companies made investments in promoter group companies with nil operations and negative net worth, subsequently impairing these investments
  • KSL made investments totalling approximately Rs. 219.5 crore across five entities: DGM Realties Pvt. Ltd. (Rs. 136 cr), Lord Ganesha Minerals Pvt. Ltd. (Rs. 77.17 cr), Kalyani Mining Ventures Pvt. Ltd. (Rs. 4.02 cr), Kalyani Natural Resources Pvt. Ltd. (Rs. 1.32 cr), and Kalyani Mukand Limited (Rs. 1.005 cr)
  • Impairments of Rs. 74.52 crore were recorded across LGMPL, KMVPL, KNRPL, and KML investments
  • Multi-layered investments by investee companies in Potentially Indirectly Linked Entities (PILEs) in India and abroad raised suspicion of fund diversion
  • Investee entities qualify as related parties of KSL under AS-18; common directorship of Mr. Baba Kalyani and Mr. Amit Kalyani established common control
  • Mrs. Deepti R Puranik named as Applicant No. 3 in her capacity as Compliance Officer and Company Secretary of KSL during the investigation period

Regulatory Changes

No new regulatory changes introduced. The order applies existing provisions of:

  • Securities and Exchange Board of India Act, 1992
  • SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (PFUTP Regulations)
  • SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations)

Compliance Requirements

  • Applicants have filed settlement applications under SEBI’s settlement framework to resolve the adjudication proceedings
  • Settlement terms (payment of settlement amount and compliance conditions) as determined by SEBI’s High Powered Advisory Committee (HPAC) must be fulfilled
  • No admission of guilt is implied by settlement; however, the entities must comply with all settlement conditions stipulated in the order
  • Listed companies in promoter groups should ensure related-party investments are made transparently, with proper disclosure under LODR Regulations

Important Dates

  • March 20, 2023: NSE examination report received by SEBI regarding Kalyani Group of Companies
  • FY 2009-10 to FY 2021-22: Period of investigation
  • 2024: Settlement applications filed (Nos. 7871/2024, 7872/2024, 7873/2024)
  • February 2026: Settlement order issued

Impact Assessment

The settlement order concludes adjudication proceedings against KSL, BFUL, and Mrs. Deepti R Puranik, limiting ongoing regulatory uncertainty for the companies. However, the case highlights significant corporate governance concerns within the Kalyani Group, particularly regarding related-party investments with nil-operation entities and subsequent write-offs. Investors in Kalyani Steels Limited and BF Utilities Limited should note the historical fund-flow irregularities identified over a 12-year period. The settlement, while resolving the immediate enforcement action, does not preclude scrutiny of the group’s investment practices by market participants. The involvement of a compliance officer underscores SEBI’s stance on holding key managerial personnel accountable for disclosure and governance failures.

Impact Justification

Involves serious allegations of fund diversion and fraudulent trade practices against a listed company and its promoter group over a 12-year investigation period; settlement reduces immediate market impact but underlying governance concerns are significant.