SEBI Clears Prime Focus of Misleading Financials and Accounting Charges

The Securities and Exchange Board of India (SEBI) has officially disposed of adjudication proceedings against Prime Focus Limited and its directors, providing a significant relief to the media services major. After a detailed investigation, the regulator concluded that the company’s accounting treatments during specific business transfers were compliant with established Indian Accounting Standards (Ind AS).

The Core of the SEBI Investigation

The regulatory probe centered on transactions undertaken by Prime Focus during the financial years 2020 (FY20) and 2022 (FY22). The company had transferred its visual effects (VFX) business division to DNEG Creative Services and later sold its post-production services business to DNEG India Media Services—both of which are indirect subsidiaries under common control.

SEBI's investigation team had raised red flags regarding the impact of these transfers on the company’s bottom line. Specifically, the regulator alleged that these transactions resulted in gains of ₹200.27 crore in FY20 and ₹250.20 crore in FY22. The investigation suggested that without these gains, Prime Focus would have reported a consolidated loss of ₹267.83 crore in FY20, implying that the transactions artificially boosted the company's reported profits and net worth.

Technical Compliance and Accounting Standards

The crux of the dispute rested on whether Prime Focus should have applied the provisions of Ind AS 103, which governs business combinations under common control. However, SEBI's adjudicating officer, Amit Kapoor, ruled that the investigation team had misapplied the standard.

The order clarified that Appendix C of Ind AS 103 applies to the acquirer or transferee in a common-control transaction, not to the transferor selling the business. Since Prime Focus acted as the transferor, the specific provisions cited by SEBI were found to be inapplicable. Instead, the officer noted that Prime Focus correctly accounted for these transactions under Ind AS 16 and Ind AS 38, relating to the sale of property, plant, equipment, and intangible assets. Crucially, these gains were disclosed as "exceptional items" rather than regular revenue, ensuring transparency in their standalone financial statements.

Clearance for Directors and Group Entities

ಈ ತೀರ್ಪು ಸಂಯೋಜಿತ ಹಣಕಾಸು ಹೇಳಿಕೆಗಳು ಮತ್ತು ಕಂಪನಿಯ ನಾಯಕತ್ವದ ನಡವಳಿಕೆಯನ್ನು ಸಹ ಒಳಗೊಂಡಿದೆ. Ind AS 110 ಅವಶ್ಯಕತೆಗಳ ಪ್ರಕಾರ, ಸಂಯೋಜನೆಯ ಸಮಯದಲ್ಲಿ ಗುಂಪು ಒಳಗಿನ ವಹಿವಾಟುಗಳಿಂದ ಬಂದ ಲಾಭಗಳನ್ನು ಸೂಕ್ತವಾಗಿ ತೆಗೆದುಹಾಕಲಾಗಿದೆ ಎಂದು SEBI ಕಂಡುಕೊಂಡಿದೆ. ಇದಲ್ಲದೆ, ಕಂಪನಿಯ ಶಾಸನಬದ್ಧ ಲೆಕ್ಕಪರಿಶೋಧಕರು ಈ ಲೆಕ್ಕಪತ್ರ ಪ್ರಕ್ರಿಯೆಗಳ ಬಗ್ಗೆ ಯಾವುದೇ ಅಭ್ಯಂತರಗಳನ್ನು ಎತ್ತ上げてದಿಲ್ಲ.

ಮಾರಾಟದ ಮೊತ್ತ ಬಂದ ಸಮಯಕ್ಕೆ ಸಂಬಂಧಿಸಿದಂತೆ, ತನಿಖೆ ಪ್ರಾರಂಭವಾದ ನಂತರ ಗಣನೀಯ ಪ್ರಮಾಣದ ಹಣವನ್ನು ಸ್ವೀಕರಿಸಲಾಗಿದ್ದರೂ, ಗುಂಪು ಘಟಕಗಳ ನಡುವೆ ಅಕ್ರಮ ಹಣದ ಸುತ್ತೋಲೆಗೆ ಯಾವುದೇ ಪುರಾವೆಗಳಿಲ್ಲ ಎಂದು SEBI ಗಮನಿಸಿದೆ. ಪರಿಣಾಮವಾಗಿ, ಪ್ರವರ್ತಕ-ನಿರ್ದೇಶಕರು ನರೇಶ್ ಮಲ್ಹೋತ್ರಾ ಮತ್ತು ನಮಿತ್ ಮಲ್ಹೋತ್ರಾ, CFO ನಿಶಾಂತ್ ಫಾಡಿಯಾ ಮತ್ತು ಆಡಿಟ್ ಸಮಿತಿಯ ಸ್ವತಂತ್ರ ನಿರ್ದೇಶಕರು ಸೇರಿದಂತೆ ಒಂಬತ್ತು ನೋಟಿಸ್ ಪಡೆದವರನ್ನು ನಿಯಂತ್ರಕ ಸಂಸ್ಥೆಯು ದೋಷಮುಕ್ತಗೊಳಿಸಿದೆ. ಕಂಪನಿಯ ವಿರುದ್ಧದ ಪ್ರಾಥಮಿಕ ಆರೋಪಗಳು ವಿಫಲವಾದ ಕಾರಣ, ನಿರ್ದೇಶಕರು ವಿರುದ್ಧದ ಪರೋಕ್ಷ ಆರೋಪಗಳನ್ನು ಸಹ ವಜಾಗೊಳಿಸಲಾಗಿದೆ.

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