SEBI penalizes Reliance for non disclosure of Rs 13 crore

Things aren’t going good for Reliance Industries Limited. In a news report by The Economic Times it has been reported, Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs 13 crore. The reason for the fine is RIL’s non-disclosure of diluted earnings per share.
The ET report says, in April 2007, RIL had allotted 12 crore warrants to its promoters entitling its holders to subscribe to equivalent number of equity shares of the company. Later in October 2008, RIL had issued 12 crore equity shares against the warrants which resulted in diluting the pre-issue paid-up equity share capital of the company.

SEBI issued a show-cause notice in February 2013, alleging that since RIL had outstanding share warrants issued in April 2007 which got converted into equity shares only during the third quarter of financial year 2008-09, it should have disclosed both basic and DEPS in its quarterly filings for the period between April 2007 and October 2008.

"However, on scrutiny of the quarterly financial statements of RIL filed with the NSE during the quarters ended June 2007 to September 2008, it was observed that RIL did not disclose separately DEPS in the quarterly financial statements for the aforesaid period and contained the same figures for basic and DEPS," Sebi said in its order .

These omissions, according to the SEBI order, violated Clause 41 of the Listing Agreement, under which companies are required to disclose to stock exchanges both the basic and diluted earnings per share (DEPS) in their quarterly financial statements.

A Reliance spokesperson told ET that the basic and diluted EPS were the same in the relevant quarters. "The company in its arguments and written submission has brought out all the relevant clauses of the Accounting Standards to substantiate why the basic and diluted EPS were 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."

"It is not out of place to mention that the noticee company (RIL) has millions of shareholders and the prospective investors who were also deprived of the correct disclosures in relation to DEPS in the respective quarterly financial results as per AS 20," Sebi's adjudicating officer D Ravi Kumar told the financial daily.

"I am of the view that the noticee (RIL) was under an obligation to disclose separately the DEPS for the quarters ended June 2007, September 2007, December 2007, March 2008, June 2008 and September 2008, which the noticee had failed to do so," Kumar said.

(Image: Reuters)