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Vandan Foods Ltd is issuing a corporate guarantee of up to ₹7.5 Crores to Bank of India in respect of a working capital facility being availed by Pharmearth Private Limited. Pharmearth is neither a related party nor part of the promoter group, though two of its directors (Mr. Rajul Gajjar and Mr. Sanjay Chauhan) hold a minor 0.84% stake in Vandan Foods. The transaction has been carried out on an arm's length basis in compliance with the Companies Act, 2013 and SEBI Listing Regulations. Vandan Foods states that the guarantee creates a contingent liability but currently has no impact on the company.
This adds a contingent liability of up to ₹7.5 Crores to Vandan Foods' books. While management says there's no current impact, shareholders should be aware that if Pharmearth defaults on its working capital facility, Vandan Foods would be liable to honor the guarantee, posing a potential financial risk.