Capital markets regulator Securities and Exchange Board of India (SEBI) on Friday imposed penalties totalling ₹2.46 crore on health and fitness chain Talwalkars Better Value Fitness (TBVFL) and Talwalkars Healthclub Limited (THL) and their promoters. While the TBVFL and THL were fined ₹24 lakh and ₹12 lakh each, the seven senior executives and promoters were fined ₹18 lakh - ₹36 lakh separately.
Alleged violations
The penalties were imposed for alleged violations related to disclosure norms and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices).
The market regulator barred promoters Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, Harsha Bhatkal and Girish Nayak for 18 months from securities market and further restrained them from being associated with any listed company.
SEBI slapped a fine of ₹36 lakh each on Girish Talwalkar, Prashant Talwalkar, Anant Gawande and Harsha Bhatkal; ₹24 lakh each on TBVFL, Vinayak Gawande and Madhukar Talwalkar; ₹18 lakh on Girish Nayak and ₹12 lakh on THL.
Barred from the market
The market watchdog also barred Girish Talwalkar, Prashant Talwalkar, Anant Gawande, Harsha Bhatkal and Girish Nayak from the market for a period of 18 months in the matter of THL and the debarment will commence after the expiration of the period of restraints imposed on the entities in the case of TBVFL.
“I am of the view that by disseminating financial statements through the platform of stock exchanges(s) or otherwise, THL and TBVFL have attempted to demonstrate a rosy picture of its affairs, which was clearly misleading and was designed to influence the decisions of the investors dealing in its securities and thereby likely to induce sale and/or purchase in its securities, and thus, in effect has violated the PFUTP Regulations,” Sebi’s Executive Director VS Sundaresan said in two separate orders.
Misrepresentation of financial statements
Both the Talwalkar promoter companies misrepresented their financial statements by inflating the bank balance disclosed in financial statements, inflation of revenue by the revaluation of investments, advances given to connected companies without rationale, which are not in the interest of the company, inappropriate recognition of revenue and expenses and unjustified investments in entities with low net worth and non-provision of impairment losses. KPMG was appointed as a forensic auditor to assist the investigating authority in conducting a forensic examination of the books of accounts of both TBVFL and THL for four financial years (2016-17 to 2019-20).
The financial results ending March 2019, both the companies (TBVFL and THL) had a total cash balance of approximately ₹77 crore and the total default on interest payment as of July 2019 was only ₹3.5 crore (term loan), which raised suspicion over the authenticity of their book of accounts.
