Bombay Dyeing-owner Wadia Family penalised over fraud, banned from securities markets by SEBI

Bombay Dyeing has been one of the most iconic companies in India’s textile sector whose Chairperson Nusli Wadia was once a member of the Tata Group board. He took on Dhirubhai Ambani in the polyester wars during the 80s, and later told Business Standard that he lost because he didn’t manipulate the system. But years later, Nusli Wadia along with sons Jehangir and Ness, has been fined more than Rs 15 crore and banned from securities market for two years over fraud.

Father, sons and an unholy scheme

The family is accused of exaggerating sales and profits in their financial statements, based on a review of their transactions from FY12 to FY19, by Securities and Exchange Board of India (SEBI). Apart from the Wadia father son trio and Bombay Dyeing, the former directors of a firm Scal Services, owned by the same family, have also been slapped with penalties and a ban. The development comes as Bombay Dyeing has been posting losses for the past two years, and trouble within the family saw Jehangir leave the boards of Wadia Group companies.

Selling assets to themselves?

Bombay Dyeing, which had posted a massive jump in profits for 2019 in comparison to 2018, before dipping to losses in 2021, had used a sale of properties to Scal to show higher income and profits in its statements. Bombay Dyeing’s indirect holding in Scal had also been restricted to 19 per cent, in order to avoid showing it as an associate firm of the group. The aim was to prevent fudging of the finances of Scal, with the numbers at Bombay Dyeing. Hence, thanks to MoUs, which aren’t legally binding, it appeared that Bombay Dyeing’s sales were Rs 2492 crore, while profits were Rs 1302 crore, when they were much lower.

The Wadia family’s fall from grace?

This amounted to cheating investors, in addition to the failure to disclose material transactions between Bombay Dyeing and Scal, both owned by the Wadias. After more than 130 years, Bombay Dyeing had to shut down its mills in 2018, and has also been reportedly hit by a rift between Jehangir and Nusli Wadia. The patriarch of the family had also been forced out of the Tata Group board, after siding with Cyrus Mistry in his battle against Ratan Tata.