SEBI finds Prime Focus Limited violated securities laws through related-party transactions

This order addresses SEBI's investigation into Prime Focus Limited and its officials for alleged violations of securities laws and accounting standards related to the sale of business divisions to subsidiaries under common control between FY 2019-20 and FY 2021-22.

Who it concerns: Prime Focus Limited, Naresh Malhotra, Namit Malhotra, Ramakrishnan Sankaranarayanan, Nishant Avinash Fadia, Rivkaran Singh Chadha, Kodi Raghavan Srinivasan, Padmanabha Gopal Aiyar, and Samu Devarajan.

What SEBI found or ordered

• SEBI investigated the sale of the VFX business division to DNEG Creative Services Limited (DCSL) for ₹273.43 crore in FY 2019-20, which resulted in a gain of ₹200.27 crore.
• SEBI investigated the sale of post-production services to DNEG India Media Services Limited (DIMSL) for ₹365 crore in FY 2021-22, resulting in a gain of ₹250.20 crore.
• SEBI observed that these transactions were between entities under common control, which may have led to misstatement of financials and inflated net worth.
• SEBI noted that a significant portion of the sale consideration (₹177.58 crore) was received by Prime Focus Limited after the initiation of the SEBI investigation.
• The Noticees filed a settlement application which was rejected by SEBI on March 11, 2026.
• The order is an adjudication proceeding under Section 15-I of the SEBI Act, with the final penalty determination pending based on the findings.

Also in the document

• The alleged violations involve related-party transactions where the buyer was an indirect subsidiary of the seller, both under common promoter control.
• SEBI observed that without the gains from these sales, Prime Focus Limited would have reported a loss in FY 2019-20 and a significantly lower profit in FY 2021-22.
• The case involves multiple directors and the CFO of the company, indicating a broad scope of alleged non-compliance.