Patanjali Foods Shares Decline Due To Supreme Court Notice Against The Promoter's Misleading Advertisements!
Financially, Patanjali Foods has also faced challenges. The company reported a 19.5% decline in net profit for the quarter ending December 2023, compared to the corresponding period in the previous year.
Shares of Patanjali Foods Ltd. witnessed a significant drop of 5% in intra-day trading on Wednesday, following a stern action by the Supreme Court against its promoter firm, Patanjali Ayurved Ltd. This action stemmed from Patanjali Ayurved's persistent violation of previous court orders by disseminating misleading advertisements for its products.
The apex court issued a contempt notice to Patanjali Ayurved and its Managing Director, Acharya Balakrishna, for continuing to broadcast deceptive claims regarding the efficacy of their products in curing diseases. This action followed a ban imposed by the court on all Patanjali advertisements, highlighting the court's growing concerns about the matter. The court even criticized the Central government for its perceived inaction in addressing the issue earlier.
This development adds another layer of complexity to the ongoing legal battle between Patanjali Ayurved and the judiciary. Despite assuring the court in November 2023 that it would refrain from making such claims in advertisements, the company's continued violation of these assurances has drawn renewed scrutiny and condemnation.
Beyond the immediate legal repercussions, the Supreme Court's action casts a shadow over the broader Patanjali Group's corporate governance practices. Patanjali Ayurved holds a significant stake of 32% in Patanjali Foods, and the broader Patanjali Group controls a substantial 74% share in the food company. These significant shareholdings mean that the consequences of Patanjali Ayurved's actions could potentially impact the entire group.
Financially, Patanjali Foods has also faced challenges. The company reported a 19.5% decline in net profit for the quarter ending December 2023, compared to the corresponding period in the previous year. This decline, coupled with the legal issues, could potentially affect investor confidence and market perception of the company.
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The Supreme Court's action serves as a stark reminder of the importance of ethical advertising practices and adherence to regulatory mandates. Furthermore, the fallout from this legal saga could potentially tarnish the reputation of the broader Patanjali Group. As the legal proceedings unfold, stakeholders will be closely monitoring Patanjali Ayurved's response to the contempt notice and its efforts to address the court's concerns. The outcome of these deliberations will have far-reaching implications for the company's future operations, corporate governance framework, and standing within the Indian business landscape.
