Goodyear India Board Reviews Ernst & Young Report on Ballabgarh Plant Inventory Theft

Goodyear India Limited, a leading tyre manufacturer listed on the BSE, has formally disclosed the outcome of its Board Meeting held on July 4, 2025, where it reviewed the findings of a detailed fact-finding report by Ernst & Young LLP (EY) regarding inventory discrepancies at its Ballabgarh Plant in Faridabad, Haryana.

The company has filed this disclosure with BSE Limited in strict compliance with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Background of the Investigation

In November 2024, Goodyear India identified a significant variance between book stock and physical inventory of finished goods – specifically farm tyres – during a routine stock-taking at its Ballabgarh Plant.

The initial shortage identified was 4,571 tyres, valued at approximately ₹39.11 million.

The variance was serious enough to trigger an immediate internal review. On February 12, 2025, Goodyear India had already intimated the stock exchange about the discrepancy under SEBI Regulation 30, demonstrating its commitment to transparent corporate governance.

Commissioning Ernst & Young LLP

To ensure an independent assessment, Goodyear India commissioned Ernst & Young LLP (EY) to conduct a fact-finding review.

EY’s investigation covered a 14-month period from October 1, 2023, to November 30, 2024.

Key elements of EY’s work included:

• Detailed walkthroughs of the inventory management and internal control processes.

• Data analytics and transaction testing on dispatch records.

• Forensic imaging of electronically stored information from employee laptops and company systems.

• Background checks on relevant third parties and employees.

• Open interviews with employees, contractual workers, and other stakeholders.

Ernst & Young’s Findings

The EY report identified multiple modus operandi contributing to the inventory shortfall:

A. Bulk Theft of Tyres in Collusion

Suspicious conversations were uncovered between a third-party loading supervisor and warehouse workers, indicating entire truckloads of tyres were siphoned off without any dispatch records.

Collusion involved:

• Contractual warehouse workers

• Loading manpower

• Security guards

• External, unidentified individuals

In 20 specific instances between July and December 2024, 4,057 tyres were mentioned in these suspicious conversations.

One security guard admitted to accepting kickbacks to omit truck details from security logs.

B. Excess Loading in Shipments

Another modus operandi involved excess loading of tyres in regular shipments:

• Trucks were deliberately loaded with more tyres than invoiced.

• Data analytics identified 2,383 instances of overweight dispatches from July 2023 to November 2024.

• Notably, 50% of these overweight trucks were dispatched between July and November 2024.

At the Ambala warehouse, 15% of these trucks were recorded with 5% to 11% excess weight.

This excess was often approved without proper quality assurance checks, allegedly due to instructions from a third-party warehouse vendor.

C. Misrepresentation of Rejected Tyres

EY’s review found inflated records of quality rejections during Pre-Dispatch Inspections (PDI):

• Kickbacks were allegedly paid to inflate rejected quantities in daily reports.

• These inflated rejection numbers were used to mask the actual shortage of tyres stolen from the warehouse.

One Quality Assurance employee admitted receiving kickbacks to manipulate these records.

D. Gaps in Production and Verification Processes

The review also uncovered serious internal control failures:

• Manual production slips lacked independent verification.

• Employees admitted that defined handover procedures between production and warehouse were not followed.

• Production records in the Management Information System (MIS) did not match data in SAP, especially during plant shutdown-startup periods.

• March 2024’s physical verification records were incomplete, with missing signatures and unverified tags.

Financial Impact and Accounting

The financial impact of the identified shortfall was already recognized in the Company’s financial results for the quarter ended December 31, 2024.

This proactive recognition reflects Goodyear India’s commitment to transparent financial reporting.

Management Response and Remedial Actions

Goodyear India’s management has taken cognizance of the EY findings and initiated legal and disciplinary actions against those involved.

Key remedial measures include:

• Site security assessment conducted and controls tightened.

• Enhanced internal controls and process improvements implemented to prevent future theft.

• Ongoing efforts to further strengthen operational transparency and security.

Board of Directors’ Oversight

At the Board Meeting on July 4, 2025, which started at 5:00 PM and concluded at 5:30 PM, the Audit Committee presented the EY report for review.

The Board of Directors formally noted the findings and expressed commitment to strengthening governance and internal control systems.

Disclosure to Stock Exchanges

Goodyear India has made these disclosures to BSE Limited in strict adherence to SEBI Regulation 30 and the SEBI Circular SEBI/HO/CFD/CFD-PoD-1/P/CIR/2023/123 dated July 13, 2023.

Such disclosures include:

• Background of the issue.

• Summary of findings.

• Actions taken.

• Financial impact.

• Future preventive measures.

This transparent communication is aimed at safeguarding stakeholder interests.

Commitment to Corporate Governance

Goodyear India Limited has emphasized its commitment to the highest standards of corporate governance, vowing to:

• Maintain stakeholder trust.

• Ensure full regulatory compliance.

• Enhance internal controls and security protocols.

Annexure I – Official Summary

As filed with BSE, Annexure I summarises:

• The fact-finding engagement commissioned with EY.

• The specific findings regarding bulk theft, excess loading, and internal process lapses.

• The financial recognition of losses.

• The corrective actions initiated.

Scope and Limitations of EY Review

The EY report notes important scope limitations:

• It was a fact-finding review, not a statutory audit.

• It was based on sample transactions and available documentation.

• Some records were incomplete or unreliable due to manual processes.

• Certain password-protected files could not be accessed.

Despite these limitations, EY delivered a detailed, independent assessment.

Company Secretary’s Statement

Anup Karnwal, Company Secretary & Compliance Officer, signed the disclosure to BSE, confirming:

The company remains committed to upholding the highest standards of corporate governance and safeguarding stakeholder interests.

Conclusion

Goodyear India’s handling of this sensitive matter showcases a strong commitment to transparency and shareholder communication.

By commissioning an independent forensic review, taking disciplinary action, recognizing the financial impact in its accounts, and strengthening security and controls, Goodyear India is striving to restore stakeholder confidence.

These steps are essential not just for regulatory compliance but also for maintaining its reputation as a trusted manufacturer in the competitive Indian tyre industry.

The Upcoming IPOs in this week and coming weeks are  Asston Pharmaceuticals, CFF Fluid Control, Smarten Power Systems, Glen Industries, Travel Food Services, Anthem Biosciences, Chemkart India.

The Current active IPO are Crizac, Meta Infotech, Happy Square Outsourcing Services, Cryogenic OGS.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.