Shares of Prime Focus Ltd. fell as much as 8% on Wednesday, October 7, following exclusive reports from CNBC TV18 that the Income Tax Department launched searches at the company's Mumbai offices. According to the report, operations began on Wednesday morning, with the stock trading 8.1% lower at 10:11 am. The stock had previously risen 17% so far this year but gave up all of Tuesday's gains, having snapped a three-day losing streak.
As reported by CNBC TV18, the Income Tax searches are being conducted in connection with foreign remittances, though further details on the nature of the transactions under scrutiny were not immediately available. Sources indicated that the searches are also being conducted at the premises of certain individuals linked to Prime Focus. The company has significant overseas operations, with 92% of its revenue coming from markets outside India, according to financial information available on its investor centre.
Prime Focus is a Mumbai-based media and entertainment services company with businesses spanning visual effects, animation and post-production. According to the report, the company has faced regulatory and insolvency-related developments this year. In June, the Securities and Exchange Board of India (SEBI) closed adjudication proceedings against the company and its directors, concluding that the accounting treatment and financial disclosures under scrutiny did not amount to misleading financial statements or accounting irregularities.
Separately, Prime Focus was involved in insolvency proceedings after the National Company Law Tribunal (NCLT) admitted an insolvency petition against the company over a ₹353.79 crore claim filed by Reliance Alpha Services Pvt Ltd. As reported by CNBC TV18, the company challenged the order before the National Company Law Appellate Tribunal (NCLAT). In July, the NCLAT set aside the NCLT admission order and approved a settlement, following which Prime Focus disclosed the closure of the Corporate Insolvency Resolution Process (CIRP). There is no immediate indication that the tax action is connected to either the insolvency matter or the SEBI proceedings.
