Why is Sebi Mum on Treehouse Scandal?

Why is Sebi Mum on Treehouse Scandal?

Mumbai-based pre-school chain Treehouse Education has shut 113 branches across the country, leaving not just investors, but parents in a lurch. The financial mismanagement at Treehouse was no secret. So why did market regulator Sebi not intervene in time?

 

A year after Mumbai-based Treehouse Education began talks with Zee Learn for a merger, it has simply decided to down shutters across 113 centres.

As a result, Zee Learn called off the merger on Friday, putting a big question mark over Treehouse’s future. Reports of financial irregularities at publicly-listed Treehouse were quite widespread in media, and yet market regulator Sebi did not order any probe.

It’s high time Sebi got cracking and issued notices to the directors and promoters of the company, primarily Rajesh Bhatia and his wife Geeta Bhatia.

Curiously enough, Treehouse had reported cash on its balance sheet of 151 crore rupees end of September last year, but by end of March this year, that number fell to a meager 22 crore rupees.

At its peak towards the end of 2014, Treehouse was valued at nearly 2100 crore rupees. Months before, brokerage firms like Elara Capital were urging investors to buy Treehouse. Today, Treehouse is worth just 80 crore rupees and that number is set to decline rapidly this week.

Besides being owned by retail investors, Treehouse counts top private equity firms such as Matrix Partners, Aditya Birla Capital, Foundation Capital and Omidyar Network among its early investors.

Matrix sold all of its shares in Treehouse in February this year. Given the sudden collapse of Treehouse, Sebi must conduct a thorough investigation of the company’s business and financials and if found guilty, bring the management to book.

Otherwise, this will be just one more Dalal Street scam where the small investor was left holding the can.

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