Shanthala FMCG removes former CFO after forensic audit findings

Shanthala FMCG Products Limited removed its former Chief Financial Officer, Yogish Mallya, on October 31, 2026 after a forensic audit classified the matter as misappropriation of company funds and found Rs 7.9436 crore of customer cash collected between April 1, 2025 and July 31, 2026 was not deposited in bank accounts.

Why did Shanthala FMCG remove its former CFO?

Shanthala FMCG removed Yogish Mallya from the Chief Financial Officer role at its board meeting on October 31, 2026 after the forensic audit established misappropriation of company funds. The company said Mallya, identified in the November 13, 2026 disclosure as a former key managerial personnel, had been given an adequate opportunity to be heard before the board acted.

The forensic review followed suspected discrepancies identified by director Santosh Kudva during an April 2026 visit to the registered office. Shanthala FMCG commissioned the review for the period from April 1, 2025 to July 31, 2026. The company’s disclosure described the resulting irregularity specifically as misappropriation of its funds, rather than only an accounting discrepancy.

What did the forensic audit identify at Shanthala FMCG?

Shanthala FMCG said Rs 7.9436 crore in cash collected from customers between April 1, 2025 and July 31, 2026 was not deposited in its bank accounts. This is the principal cash-collection finding in the forensic audit, and it covers a period ending about three months before the board removed the former CFO on October 31, 2026.

The company separately disclosed Rs 5.6919 crore transferred to two related parties during financial year 2025-26 without the requisite approvals of the Audit Committee and board, where applicable. Of that aggregate, Rs 57.84 lakh remained outstanding from a subsidiary at March 31, 2026. The filing treats the unbanked customer cash and the related-party transfers as separate findings.

Shanthala FMCG had also withdrawn distributorship arrangements with major vendors, according to earlier exchange disclosures dated May 13, 2026 and August 6, 2026. The November 13 filing does not quantify the effect of those withdrawals or link a specific vendor arrangement to either the Rs 7.9436 crore customer-cash finding or the Rs 5.6919 crore related-party transfers.

How did the findings affect Shanthala FMCG’s accounts?

Shanthala FMCG recognised Rs 7.6079 crore as recoverable from the former CFO and recorded an equivalent Rs 7.6079 crore impairment loss under exceptional items in its statement of profit and loss for the financial year ended March 31, 2026. The matching entries recognise the claimed recovery while reflecting the uncertainty surrounding recovery, as described in the disclosure.

The company reported a loss after tax of Rs 5.8881 crore for financial year 2025-26. Its filing says the impairment treatment resulted in that loss after tax, but it does not provide a result before the exceptional item. It therefore does not support a calculation of the company’s operating outcome excluding the impairment charge.

The Rs 7.6079 crore recognised for the year ended March 31, 2026 was Rs 33.57 lakh below the total Rs 7.9436 crore of customer cash stated as not deposited. Shanthala FMCG said the remaining Rs 33.57 lakh would be recognised for the period ending September 30, 2026, separating the accounting treatment across the two reporting periods.

What legal and control actions is Shanthala FMCG taking?

Shanthala FMCG said the matter has been reported to appropriate authorities. Its statutory auditors noted that it falls under Section 143(12) of the Companies Act, 2013, and that Form ADT-4 will be filed with the Central Government. The disclosure does not state the date of that filing or identify any subsequent action by a government authority.

The company said it is actively pursuing recovery of the outstanding amount from the former CFO, while management is discussing available remedial legal measures with lawyers. The November 13, 2026 filing does not disclose a court claim, police complaint, recovery deadline or amount recovered. Its stated position is therefore that recovery and legal options are being pursued, not that a recovery has been completed.

The board has confirmed actions including preserving records and digital evidence, reconciling customer collections with bank entries, and reviewing approval-related matters and related-party transactions. Those actions address the two disclosed categories: Rs 7.9436 crore of customer cash not deposited and Rs 5.6919 crore of transfers lacking the stated requisite approvals in financial year 2025-26.

Shanthala FMCG also plans independent testing of strengthened internal financial controls and approval mechanisms. The filing does not name the party that will conduct the testing or set a completion date. However, the proposed work includes controls over collection-to-bank reconciliation and approval processes for related-party transactions.

Conclusion

Shanthala FMCG’s response combines the October 31, 2026 removal of its former CFO with accounting recognition, statutory reporting and recovery efforts. The forensic findings cover Rs 7.9436 crore of customer cash not deposited between April 2025 and July 2026, as well as Rs 5.6919 crore of related-party transfers in financial year 2025-26 without the stated requisite approvals.

Next, Shanthala FMCG has said Rs 33.57 lakh will be recognised for the period ending September 30, 2026, while its auditors have identified the Form ADT-4 route and management is considering legal remedies. Further disclosures may show the outcome of the recovery pursuit, reconciliations of customer collections and bank entries, and independent testing of strengthened controls.