Sebi fines RIL Rs 13 cr for non-disclosure of earnings ratio

Order follows a probe by markets regulator in an over seven-year old case involving alleged irregularities in issuance of 12 crore warrants by the company

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

The violations date back to the 2007-2009 period, when RIL had issued 120 million warrants to entities in the promoter group on preferential basis.

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

The market watchdog has alleged that 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 that there they did not disclose diluted EPS separately as the warrants were exercised at the fair value and there was no dilution of earnings.

Sebi’s counter argument to the RIL’s submission that post conversion of warrants into equity shares would lead to reduction of net profits so adequate disclosure were required in that regard.

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 has failed to give it’s investors a fair chance to make an informed decision, it stated.