Shanthala FMCG Products has disclosed alleged fund misappropriation involving its former Chief Financial Officer Yogish Mallya, following the completion of a forensic audit. The company reported irregularities involving approximately ₹13.63 crore, raising serious questions about financial controls, management oversight and the protection of company funds.

The forensic audit identified two major categories of transactions. These included customer collections that were allegedly not deposited into company bank accounts and transfers made to related parties without the required approvals.

According to the latest disclosure, ₹794.36 lakh, equivalent to approximately ₹7.94 crore, collected from customers was not deposited into the company’s accounts. This finding raises questions about how customer receipts were handled and monitored.

The forensic audit also identified ₹569.19 lakh, or approximately ₹5.69 crore, transferred to related parties without board approvals. Such transactions raise concerns about the effectiveness of internal financial controls and related party transaction oversight.

An earlier FY26 audit related disclosure separately referred to ₹57.84 lakh remaining outstanding from transfers to two related parties. This amount is important because it indicates that at least part of the identified transfers had not been recovered at the time of that disclosure.

The findings were made by GuruJana Consulting LLP, the forensic auditor appointed by the company. The board had taken the final forensic audit report on record at its meeting on October 12, 2026.

Following the findings, the board terminated Yogish Mallya from the position of CFO with effect from October 31, 2026. The company cited the alleged misappropriation of funds as the reason for the action.

The company also appointed Ratnakar Rai as its new Chief Financial Officer. The appointment represents a management change at a time when the company needs to strengthen financial oversight and restore confidence in its reporting processes.

The issue did not emerge suddenly in November. Shanthala had initiated a forensic audit earlier in 2026, and the process continued through changes in the appointed forensic auditor before the final report was placed before the board.

The company had initially appointed Chaudhary Chaudhary and Co as forensic auditor. The firm later resigned, citing professional commitments, after which GuruJana Consulting LLP was appointed to complete the investigation.

The FY26 financial statements provide further context. Shanthala reported revenue from operations of approximately ₹55.93 crore for FY26, representing growth of around 6% over the previous financial year.

However, the company reported a net loss of ₹5.89 crore for FY26, compared with a profit of approximately ₹96.53 lakh in the previous year. The loss included a substantial exceptional impairment connected with amounts identified during the forensic audit.

The FY26 accounts recognised an impairment loss of approximately ₹7.61 crore. This is a separate reported accounting figure from the ₹7.94 crore customer collection amount cited in the later disclosure. The company has not provided enough information in the available summaries to reconcile the difference, so the two figures should not be treated as interchangeable.

The statutory auditor also raised concerns in the FY26 audit report. The qualified opinion referred to the forensic audit findings and stated that the auditor could not determine whether further adjustments might be required in the financial statements.

There was also an inconsistency in the company’s accompanying communications. While the statutory audit report was described as qualified in the detailed filing, a covering communication referred to the audit reports as carrying an unmodified opinion. Investors should refer to the signed audit report when assessing this matter.

Another unusual development was the delay in finalising the FY26 financial results. The company obtained an extension to hold its annual general meeting after the forensic audit process affected the preparation and completion of its financial statements.

The company also faced an exchange penalty of approximately ₹2.66 lakh for delayed financial reporting under the applicable listing requirements. This adds another compliance concern to an already difficult period for the SME listed company.

There is a separate business development that deserves attention. Shanthala’s board had noted the termination of its distributorship arrangement with Hindustan Unilever Limited in August 2026. This is relevant because the company’s distribution relationships can influence its product reach, sales and operating performance.

The combination of the distributorship termination, delayed financial statements and forensic audit findings makes the company’s operating situation more complicated than the latest fraud disclosure alone suggests. Investors need to assess the company’s business continuity alongside its governance issues.

Recovery of the identified amounts will be important. The company has indicated that legal and recovery action is being initiated, but the timing and actual amount recovered will determine how much of the reported financial exposure can eventually be reversed.

The company will also need to demonstrate that customer collections are now being deposited through properly monitored processes and that related party transactions receive the necessary approvals. Stronger financial controls, independent oversight and transparent disclosures will be important in rebuilding confidence.

For shareholders, the next developments to monitor include progress in legal recovery, any further findings from the forensic audit, clarification of the accounting differences, and the company’s ability to restore regular financial reporting and stable business operations.

Shanthala FMCG now faces a significant governance and credibility challenge. The forensic findings, FY26 loss, qualified audit concerns and termination of the HUL distributorship all deserve attention. The company’s future credibility will depend on transparent disclosures, effective recovery efforts and evidence that its internal controls have been strengthened.