Sebi bars Pyramid Saimira promoters for inflating profits

This is probably the first case of inflating profits and revenues that has come to fore after disgracing Satyam Computer accounting scam came to the fore in January 2009. The magnitude of the wrong-doing in Pyramid Saimira Theatre Ltd (PSTL, however, may not as big as in the Satyam case.

"I hereby restrain P S Saminathan from buying, selling or dealing in securities in any manner whatsoever or accessing the securities market, directly or indirectly, and from being a director in any listed company for a period of ten years from the date of this order," Sebi said in an order.

Sebi also restrained Uma Saminathan, co-promoter and wife of P S Saminathan, from any dealing in the securities market and from being a director of any listed company for a period of five years.

When contacted, Saminathan told PTI that he has not seen the order and would comment only after going through it. The market regulator said PSTL inflated profits and revenues through fictitious entries in its accounts, disclosed the same in quarterly and annual results for financial year 2007-08 and thereby misled the public on their investment decisions.

"The fictitious entries in the books of accounts with a view to paint rosy picture about the financial health of the company, disclosure of the inflated financial position and false corporate announcements mislead the investing public and constitute worst kind of fraud on the part of the company, management and promoters," Sebi said.

PSTL disclosed to exchanges on January 30, 2009 that it had entered into agreement with 802 theatres as on June 30, 2008, Sebi said. "Out of 802 agreements, PSTL could show only 257 original agreements to Sebi officials... This leads to inevitable conclusion that the balance 545 agreements never existed. Probably, revenues accounted against these 545 agreements have been entered as consolidated entries in the accounts," the market regulator said.

Sebi said it further found that there was no payment for security deposit in respect of the agreements. "The fictitious revenues have been converted to 'theatre collection receivables' which, in turn, have been converted to 'security deposits'," it said.

This is probably the first case of inflating profits and revenues by a listed company, after Rs 10,000 crore Satyam case shocked the corporate world. However, in case of PSTL total revenue itself was of the order of Rs 749.30 crore during 2007-08.

Satyam founder Ramalinga Raju confessed in January last year of over-presenting figures in the balance sheet.