Tree House promoter Rajesh Bhatia absconding; SEBI, EOW close on his heels

Rajesh Bhatia, Managing Director and Promoter of the beleaguered Tree House Education, has been absconding for over a week with Mumbai Police’s Economic Office Wing (EOW) hot on his heels.

Sources aware of the development told Moneycontrol that the EOW has been conducting raids at various places in an attempt to track him down. In February, Bhatia had applied for anticipatory bail soon after the EOW had filed an FIR against him. The bail, however, was rejected on April 4. Bhatia has been difficult to trace since April 8, adds the source.

The playgroup chain has been in the spotlight ever since it shuttered 113 branches last year owing to severe cash crunch which left the company unable to pay staff salaries. At the time, Bhatia admitted that the company’s fortunes had taken a turn for the worse and demanded time to sort out finances. But since then, SEBI has launched a probe into alleged questionable accounting practices of the playgroup chain.

Citing various irregularities in Tree House’s books, SEBI has now asked the company to explain the reason behind the company’s decision to park interest-free security deposit of Rs 187 crore in different trusts for a 30-year period.

The regulator has sought copies of Board agenda and minutes of the meeting. SEBI also raised concerns over an expenditure of a whopping Rs 179 crore incurred on purchasing just furniture in one financial year (FY16).

The numbers didn’t add up as the company in all the six years it has remained in existence spent a total of Rs 187 crore on furniture. Further, the free fall seen in company’s profit by more than 90 percent in a single year also raised SEBI officials’ eyebrows.

SEBI started its probe after Zee Learn called off its merger plans withTree House last year.

JN Gupta, Founder of SES proxy firm, told Moneycontrol: “It is a good step to enhance investor confidence as such unscrupulous promoters would not be able to go scot-free. This incident must open the eyes of corporates who in a desire to expand are ready to have business dealings with such companies and promoters. Zee Learn has learned bitter lessons”.

In year to date, the share price of Tree House has fallen by 75 percent. The price has tanked to Rs 20 now from Rs 80 in April last year.