UPL (United Phosphorus Limited), a leading agrochemical company saw itself in the midst of a storm at the stock exchanges on Thursday after it took a heavy beating following a whistleblower complaint alleging the promoters of funds diversion.

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The market hammered the stock down by 15 percent, however, Bank of Baroda Capital continues to remain bullish on the stock. The brokerage is of the view that it is a good opportunity for the investors to pick the stock right now.

The stock suffered yesterday after a report by ET Prime cited a whistleblower complaint alleging that promoter Jaidev Shroff along with few of his family members siphoned off funds via eight shell companies. However, UPL later clarified that this is an old complaint made in 2017 (fully disclosed). The company stated that the eight companies are unrelated parties.

According to the brokerage, the company has faced multiple corporate governance issues like such in the past as well, which was reflected in the steep valuation discount of 40 percent v/s 5-year average. Therefore, the brokerage feels that the current correction in the stock price is an opportunity to accumulate for the investors.

In its conference call yesterday, the company management clarified that the whistleblower was motivated by mala fide intentions. It said, "Several transactions under Teknomic (one of the shell companies) were part of the ordinary course of business. Teknomic was owned by Sameer Mehta (unrelated party) who had an arms-length lease agreement with UPL that expired in March 19."

Further, allegation that Salisbury House is owned by J Shroff is incorrect. It is an old complaint raised by Shroff’s wife Poonam to a UPL committee in July 17 and the matter, including related party transactions, was independently looked into and cleared by leading law firm J Sagar Associates in 2018, the company added.

Following all the events, Bank of Baroda Capital said the company has buoyant agronomic conditions across the US, Europe and Latin America (LATAM). Continued price hikes in LATAM will bode well for strong H2 earnings and debt reduction for UPL.

"Hence, the near-term concerns don't threaten the current valuations of 6x FY22E EV/EBITDA. We maintain 'buy' on the stock, with target price at Rs 650 per share," the report said.

At 2: 00 pm, the stock traded half a percent higher to Rs 441 per share on the NSE.

(Edited by : Jomy)