Vedanta unit Sesa Goa under fraud investigation
Mumbai: Sesa Goa, a USD 5 billion unit of London-listed metals group Vedanta Resources, is being investigated by the government for financial and other irregularities.
India`s largest iron-ore exporter said on Thursday it and its unlisted Sesa Industries Ltd (SIL) subsidiary were under investigation by the Serious Fraud Investigation Office (SFIO), and the probe had to be completed in six months.
The investigation comes 10 months after India`s biggest corporate scandal, a USD 1 billion fraud at IT services firm Satyam Computer.
"I think the overseas investors will be very happy that the regulatory agencies in India are becoming more and more intrusive in company affairs," said Rishi Sahai, managing director of Cogence Advisors, a New Delhi-based corporate advisory firm.
"There is an increased focus on protecting shareholders` interest," he said.
Sesa Goa said it believed the investigation originated from a complaint filed in 2003 by a shareholder of Sesa Industries. Vedanta bought a 51 percent stake in Sesa Goa in 2007 for nearly USD 1 billion from Japanese trading house Mitsui & Co.
The company said it received requests from the Registrar of Companies for information from 2001 to 2009.
"The scope of investigation includes looking into the state of affairs of the company and SIL in respect of mismanagement, malpractices, financial and other irregularities," Sesa Goa said in a statement.
Mitsui said it had not heard from the SFIO or Sesa Goa about the investigation and was not in a position to comment.
"Sesa Goa is expanding its mining operations in India, and this might have invited regulatory scrutiny," said Deven Choksey, chief executive of KR Choksey Shares and Securities.
"Otherwise it is very confusing, and there is no clarity on what this investigation is all about."
Headquartered in the picturesque state Goa, famous for its beach resorts, Sesa Goa`s mining operations have faced protests from activists who claim it pollutes the environment and contaminates ground water.
Sesa Goa shares fell as much as 6 percent on Thursday before rebounding to close up 1.5 percent at 300.10 rupees. In London, Vedanta shares were down 0.7 percent, while the mining index was up 1.4 percent.
Sesa Goa shares fell 12 percent on Tuesday after local media first reported the investigation. The company said then it was unaware of any probe, and its shares ended up 7 percent on Wednesday after earlier dropping to a three-week low.
"You can`t expect it to fall much more, pending further clarity," said a dealer at a brokerage in Mumbai on Thursday.
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