India’s Ministry of Corporate Affairs has ordered an investigation into the accounts of Eros International Media, per a Reuters report quoting government officials.

Variety reached out to Eros for remark however had not obtained a reply by press time.

The ministry investigation follows an examination into the corporate’s accounts by monetary market regulator Securities and Exchange Board of India (SEBI). That resulted in an interim order in late June and the banning of two Eros executives.

The June order, which probes Eros’ monetary practices in forensic element for the interval 2012-13 to 2019-20, discovered that the corporate, which was within the enterprise of manufacturing and distributing movies, had superior funds to 19 entities mentioned to be for movie manufacturing. Some $153 million of the quantities transferred to those corporations was “untraceable.” Film rights have been neither created nor the funds returned to Eros. Approximately 94% of this determine was subsequently written off by Eros. The order concludes that of the untraceable quantity, roughly half was “siphoned off/diverted by Eros.”

The SEBI investigation additionally regarded on the accounts of the businesses that Eros had superior funds to. Here it discovered that “in some instances, the amounts were paid back by these entities to Eros on the very day the funds were transferred by Eros to their accounts. In other instances, it was transferred back after a gap of a few weeks/months.”

“It prima facie appears that [Eros]overstated its books of accounts by recording revenue receivable from potentially bogus entities and subsequently round tripping its own funds to these entities to enable them to make payments against the revenue that has already been recognized. It was also noted, that over the years, the revenue from these 19 entities came to represent a significant portion of the total earnings of Eros,” the order states. It used 2019 for instance and mentioned that 65% of Eros’ earnings that yr got here from these corporations.

“These figures call into question the integrity of the financial statements of the company and give an indication that Eros was using the cover of these entities to inflate its financial statements. Subsequently, in FY 2019-20, it appears that the company, under the guise of Covid-19, attempted to clean up its balance sheet by writing-off the outstanding balance shown as receivable from these 19 entities in its books,” the order states.

The order specifies 4 corporations to which Eros continued making funds as not too long ago as 2022-23 and says: “Out of the funds transferred by Eros to these entities, substantial amounts had been potentially diverted by these entities to related parties of the promoters of Eros and not utilized for the stated purpose for which these funds were transferred.”

The order observes that “there is sufficient material on record to arrive at a prima facie finding that the books of accounts of the company have been overstated and do not present a true and fair picture of the financial health of the company. The transactions between the ‘content advance entities’ and the ‘trade receivable entities’ raises the possibility that Eros was circulating funds whereby amounts transferred as content advances were subsequently recognized as revenue by routing it through trade receivables entities. The fidelity of the financial statements of the Company have been rendered a chimera by virtue of these transactions. This coupled with the fact the company is still advancing funds to entities which have been potentially involved in siphoning off funds to entities related to the promoters, makes it imperative for SEBI as the market regulator to take action in the interest of the public shareholders of the company.”

SEBI has banned Eros vice chair and managing director Sunil Lulla and CEO Pradeep Dwivedi from holding administration positions in any listed firm, or buying and selling, and had directed Lulla to supply an in depth report on the funding advances made by the corporate. SEBI has additionally directed the Bombay Stock Exchange to nominate a forensic auditor to look at the books of accounts of three listed corporations which “acted as conduits in the alleged misrepresentation/diversion of funds by Eros.”

This was SEBI’s second excessive profile banning of senior administration at an Indian media firm in latest months, following action against Zee Entertainment Enterprises in June.