Shares of Asian Paints were trading in the red on Thursday after the paint maker made headlines again for related party transactions.

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At 9:16 am, shares of Asian Paints were trading 0.2 percent lower at Rs 3,154 on the BSE.

A media report said that the Dani family, promoter of Asian Paints, has come under fire from proxy advisory firm Ingovern. The firm pointed out several related party transactions between Asian Paints and Paladin Paints & Chemicals, a private company owned by the Danis.

Ingovern has reportedly highlighted the likely conflict of interest involving entities controlled by the Danis, which also supply raw material to the paint manufacturer.

Another report said that Ingovern has sought the removal of Asian Paints' promoters Ashwin Dani and his son Malav Dani from the board amid allegations of related-party transactions.

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This development comes after reports a month ago claimed, a whistleblower had written to SEBI alleging that the Danis had enriched themselves at the cost of Asian Paints' shareholders.

The whistle-blower informed SEBI that money to buy a company called Paladin Paints & Chemicals went from Asian Paints but its promoters Ashwin Dani and son Malav now control it in their personal capacity.

In response to this, the paint maker had then clarified that “The said complaint was investigated in accordance with the Company’s Whistle Blower Policy, and after undertaking a detailed review of the transactions which were mentioned therein, the said complaint was closed as the enquiry concluded that the transactions were undertaken in compliance with the law, and there was no basis for the allegations made”.

Shriram Subramaniam, Founder and Managing Director at InGovern, said that "We are just saying that the related party transactions are not explained in detail by the company. The company has come out and said that the Paladin does only transactions of Rs 1.2 crore or Rs 2 crore, but the fact that the company has to now put out outside of what they have already put in annual report means that Asian Paints is lacking in disclosure".

"More than Rs 500 crore worth of goods are procured from promoter related entities. Shareholders do not know which these entities are and what is the logic, why Asian Paints is procuring almost 6 percent of the raw material that it procures from promoter-owned entities? That is what we are questioning. Rs 1.3 crore is with Paladin. The overall related party transactions is Rs 500 crore. At the end of the day, we hold Asian Paints to higher standards, the fact that most other companies disclose line by line with which related party, what is the value of the contract and what is the logic - that most other companies are doing, why is Asian Paints not doing? We are just saying that this conflict of interest is there," he said.

Subramaniam added, "And the fact that most other companies disclose it valuewise across each bill - look at all the Nifty50 companies, majority of companies do it. So from that perspective, we hold Asian Paints to higher standards".

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First Published:Nov 25, 2021 9:39 AM IST