Sebi slaps Rs 13-crore penalty on RIL

Regulator charges company with violation of listing agreement; company contests charge

The Securities and Exchange Board of India (Sebi) has imposed a fine of Rs 13 crore on Reliance Industries Ltd (RIL) for violation of the listing agreement with regard to disclosure of a financial metric. Sebi on Friday charged the company with violating section 41 of the listing agreement and section 21 of the Securities Contract Regulations Act (SCRA).

The violations date back to  2007-09, when RIL had issued 120 million warrants to entities in the promoter group on a preferential basis.

According to the regulator, on  the conversion of these warrants into shares, there was an increase in the paid-up share capital of RIL.
 

IN REGULATORY CROSSHAIRS: SEBI VS RIL IN RECENT TIMES

• May 2013: Sebi levies a penalty of Rs 11 crore on RIL's subsidiary, Reliance Petroinvestments (RPIL), for insider trading in shares of IPCL in 2007
• August 2014: The regulator slaps Rs 13-crore penalty on RIL for flouting disclosure norms
• Pending matter: Sebi probing RIL for allegedly making illicit gains of about Rs 500 crore by trading in shares of its erstwhile arm, Reliance Petroleum. SAT had recently dismissed RIL’s appeal against Sebi’s decision to deny consent in this case

In a statement, RIL said the issue was not of non-disclosure. It said, “The issue relates to the method of calculation of diluted EPS under the Accounting Standards. The issue is not of non-disclosure. It can be observed from the results published by the company of all the quarters in question that both basic and diluted EPS have been disclosed. The company in its arguments and written submission has brought out all the relevant clauses of the Accounting Standards to substantiate why basic EPS and diluted EPS were the same in all the quarters. We are now studying the order as to the interpretation Sebi has taken and would take appropriate action based on legal advice.”

The market watchdog has said the company did not disclose the diluted earnings per share (EPS) in financial results, despite the existence of share warrants—- a violation of listing agreement.

During a personal hearing in  March this year, RIL had argued they did not disclose,  diluted EPS separately as the warrants were exercised at the fair value and there was no dilution of earnings.

Sebi said adequate disclosure was a must. The market regulator, in the order, stated that disclosure of EPS is “one of the important tools that investors use while making a decision regarding their investment in particular scrip”. By not making adequate disclosure, the company to give its investors a fair chance to make an informed decision, it stated.