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Dec, 09 2014

Hassad Food files FIR against Bush Foods

Hassad Food, owned by Qatar Investment Authority has alleged that it invested around Rs 750 crore in Bush Foods in April 2013 for 69.5 per cent stake based on false financial statements and nonexistent inventory.

Hassad Food, the Qatar based company which acquired Delhi’s Bush Food last year has filed an FIR against the Indian Basmati Company, as per a report in ET.

The Qatar based company said in a statement that Bush Foods had fudged accounts and indulged in fictitious sales amounting to Rs 1,000 crore.

Hassad Food, owned by Qatar Investment Authority has alleged that it invested around Rs 750 crore in Bush Foods in April 2013 for 69.5 per cent stake based on false financial statements and nonexistent inventory.

The company’s legal counsel Simon Henders on its FIR said Bush Foods' top management including promoter Virkaran Awasty provided incorrect financial statements to induce investment.

Hassad Food has also accused Standard Chartered Private Equity officials, claiming that they were aware of the financial affairs of Bush Foods and helped negotiate and seal the deal. Hassan Food's acquisition of Bush Foods had given an exit option to Standard Chartered PE that held around 30 per cent while promoters including Awasty family too sold part of their stake.
An email query to Hassad Food didn't get any response as of press time while Bush Foods was unreachable for comment.  And the Standard Chartered declined to comment.

Bush Foods was founded in 1992 by Awasty who still holds 30.5 percent stake in the company.

"The internal investigations reveal significant discrepancies between the actual inventory available with the company and inventory that was shown in its books of accounts up to October, 2013, which has been represented to various shareholders / lenders ," said Henders in the FIR.
"The misrepresentations indicate a huge accounting fraud, which is to the tune of approx Rs 1,000 crore," it read. Hassad Food alleged that Bush Foods, during the deal process, maintained it had at least 12 months of stock of inventory at any given time in order to ensure continuity of supply for the branded products.

A vendor due diligence report dated October 31, 2013 prepared by PwC at the request of Bush Foods, also stated that the company had inventories of Rs 895.50 crore as on March 31, 2012.

However, Hassad Food in its internal investigation this year found that the actual extent of the stock of inventory to be in the range of Rs 18-30 crore as substantial number of bags were filed with husk and wooden pallets, giving an impression that warehouses are filled with stocks. Hassad Food also alleged that credit facilities have been availed on behalf of Bush Foods on the basis of non-existent stocks.
 

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