Sebi fines RIL Rs 13 cr for not disclosing earnings dilution

Markets regulator Sebi today slapped a penalty of Rs 13 crore on corporate giant RIL on charges of repeated non-disclosure of a key earnings ratio for six quarters, saying this information would have had a significant impact on investors' decision to buy or sell shares.
The penalty includes a fine of Rs 1 crore for violation of Listing Agreement and another Rs 12 crore for violation of the Securities Contracts (Regulation) Act in relation to non-disclosure of the Diluted Earnings Per Share (DEPS) in the quarterly and annual disclosures.
The order follows a probe by the capital markets regulator in an over seven-year old case involving alleged irregularities in issuance of 12 crore warrants by Mukesh Ambani-led RIL to its promoters entitling its holders to subscribe to equivalent number of equity shares of RIL.

It was alleged that this issuance in April 2007 had resulted in diluting the pre-issue paid-up equity share capital of RIL, but the company repeatedly failed to disclose such dilution in earnings for as many as six quarters.
While Reliance Industries Ltd (RIL) did not reply to queries related to Sebi fine, the regulator said in its 15-page order that the company had submitted before it that there would "be no dilutive effect in the Earning Per Share (EPS) if the proceeds from the issue are not less than the fair value of the shares issued".
Sebi, however, ruled that "conversion of warrants into equity shares would necessarily result in reduction in net profit per share of the company as the same amount of profit needs to be distributed to additional equity shares as well upon such conversion".

The latest penalty comes over one year after another fine of Rs 11 crore slapped by Sebi in May 2013 on Reliance Petroinvestments, an RIL subsidiary, in an insider trading case. That case was related to charge that Reliance Petroinvestments bought shares of erstwhile IPCL (Indian Petrochemicals Corp Ltd) in early 2007 just before it declared an interim dividend and announced the merger of IPCL with RIL.
Also, the Securities Appellate Tribunal dismissed a plea by RIL on June 30 this year against Sebi, which had rejected the company's consent application on an alleged irregularities in relation to trading in shares of Reliance Petroleum Ltd, then a separately listed group company, in November, 2007.