The Ministry of Corporate Affairs (MCA) has asked MG Motor India to explain certain alleged irregularities in its books, people familiar with the development told ET.
The MCA, through its registrar of companies (RoC), has summoned the company’s directors and its auditor Deloitte to explain certain alleged audit deficiencies that had been discovered during the course of the probe.
MG Motor said that it has received a notice seeking clarifications primarily on why it had reported operational losses for its first year of operations, 2019-2020.
“The inquiry against the firm is part of the larger nationwide probe commenced by the ministry into entities with Chinese nationals on their boards. However, in the instant case, certain audit irregularities have been found and they require explanation for which the directors have been summoned to join the probe,” said a source close to the development.
The company’s directors were summoned under section 207 of the Companies Act, 2013. The said section empowers the Registrar or the inspector to conduct inspection or inquiry and call upon books of accounts for scrutiny.
MG Motor India, in a statement to ET said it was a law-abiding, professionally managed company that adhered to the highest standards of compliance and governance, and was committed to transparency. “We fully cooperate with the government authorities on all issues and are in process of providing the desired records and information to the Registrar of Companies within the stipulated time frame,” the company said.
It further stated that it was impossible for any automobile company to be profitable in the first year of its operations given the large capital investment involved and the long gestation period in a highly competitive market such as India where many multinational companies have struggled for decades and have accumulated losses. “We are a global multinational, and our books are maintained as per Indian accounting standards and audited by reputed audit firms.”
An email sent to Deloitte remained unanswered until press time.
MG Motor is a British brand that was acquired by China’s largest automaker SAIC Motor. SAIC entered the Indian market through the MG Motor brand and launched its first car here in 2019.
While MG Motor’s cars have found success with Indian consumers, the company’s proposal to bring more capital into India from its parent to scale operations has run into a roadblock.
The Indian government had heightened scrutiny on direct investments from countries sharing a land border with India at the peak of the Covid-19 pandemic in 2020. MG Motor has been awaiting approvals for around two years now and has started looking for alternative sources of capital, including from capital investors, ET reported in July.
Earlier, three mobile phone makers with Chinese ownership – Oppo India, Xiaomi Technology India and Vivo Mobiles India – had been served notices for an investigation into alleged duty evasion, finance minister Nirmala Sitharaman informed the upper house of the parliament in August.
Read More:
Led by current Renault China CEO Soh Weiming and backed by Renault and Dongfeng Motor, two-year-old Beyonca plans to unveil its first production car in the first quarter of next year with deliveries from 2024, Soh told Reuters.
“It is suspected that there is a possible defect in rear brake assembly pin (‘Part’), which in a certain case, may break and cause a peculiar noise. There may be a possibility of impact on brake performance in the long run,” said the company in a statement.
