Shares of Amira Nature Foods Ltd. ANFI soared 48.1% yesterday, after sources revealed that various allegations made against the company were declared unsubstantiated by an independent investigator – BDO LLP.
Per sources, a report was issued on Amira Foods by a third-party firm in Feb 2015, claiming that the company provided misleading business information to the public. The company was charged of overstating its India-produced Basmati rice revenue in 2013 and 2014, on the back of exaggerated exports.
Further, the report held Amira Foods responsible for conducting secret transactions with various counterparties, including one of its biggest suppliers; its largest customer and a company from which Amira Foods planned to purchase land worth $30 million, among others. Moreover, Amira Foods’ Chief Executive Officer (“CEO”) was suspected of using company funds for personal use.
Also, back in August, the company announced Deloitte Haskins & Sells LLP’s (“Deloitte”) termination, as its independent registered public accounting firm. Prior to its termination, Deloitte had urged the Audit Committee to open an investigation via external forensic investigators into the issues highlighted in a short seller report of Jul 30, 2015, along with other transactions recognized by Deloitte related to its incomplete audit of Amira Foods’ financial statements for the year ended Mar 31, 2015.
The Investigation and its Outcome
Per sources, Amira Foods had appointed BDO to conduct a review on the aforementioned allegations against the company. The review comprised an analysis of Amira Foods’ reported global sales of Basmati rice, relative to Amira India’s Basmati exports which was approved by the Agricultural and Processed Food Products Export Development Authority (“APEDA”).
Alongside, the review included a study over the Indian market size of Basmati, a clear evaluation of the company’s transactions with third parties, and an analysis to find out if there was any hidden revenue transaction between the company and its CEO.
However, following the conclusion of the review, BDO declared these allegations baseless, thereby leading Amira Foods to get a clean chit.
Stocks to Consider
Stocks in the broader consumer staples sector worth considering include Adecoagro S.A. AGRO, Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria CRESY and Diamond Foods, Inc. DMND, each carrying a Zacks Rank #2 (Buy).
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