SEBI fines Som Distilleries and three officials over subsidiary stake cut

SEBI has imposed a penalty of Rs 1 lakh each on Som Distilleries and Breweries Ltd, its chairman and managing director, a whole-time director and its company secretary, in an order dated 4 November 2026. SEBI's adjudicating officer found that the company cut its stake in a key subsidiary without the prior approval of its shareholders. Each must pay separately within 45 days of receiving the order.

What Happened

SEBI investigated the company, listed on BSE and NSE, for FY 2021 to FY 2024.

According to the order, Woodpecker Distilleries and Breweries Private Limited, then a wholly-owned subsidiary, contributed 43.12% of the company's consolidated revenue in 2021-22 and 47.34% in 2022-23. In 2023-24 the subsidiary made a rights issue. The company subscribed to 50 lakh shares for Rs 10 crore and gave up the rest of its entitlement in favour of two promoters, who took 1 crore shares for Rs 20 crore and 50 lakh shares for Rs 10 crore. The company's holding fell from 100% to 78.87%.

The adjudicating officer held that this was a disposal of substantially the whole of an undertaking, which under SEBI's listing rules needs a special resolution and the approval of a majority of public shareholders, and that this approval was not obtained. The company had argued that declining part of a rights entitlement is not a sale, and that the money was needed for the subsidiary's Rs 70 crore capital expenditure programme. The officer said the commercial reason could be a mitigating factor but did not cure the missing approval.

The notice also alleged that a Rs 21.36 crore corporate guarantee the company gave to State Bank of India for a related party, Aryavrat Projects and Developers Private Limited, lacked prior audit committee approval. The company said the guarantee was never invoked and stood terminated on 31 March 2025.

What It Means

The rule gives public shareholders a vote before a listed company gives up a large part of its business. SEBI found the two executive directors responsible for the decision and the company secretary responsible for compliance. The order notes SEBI has penalised the company before. It is a regulator's finding and can be appealed before the Securities Appellate Tribunal.

Source: SEBI order