Sebi penalises RInfra, others for non-submission of no default statement

Capital markets regulator Sebi on Wednesday imposed penalties on seven entities including Reliance Infrastructure, Reliance Power and Incredible Realcon for non-submission of no default Statement (NDS) to credit rating agencies.

The regulator levied a fine of Rs 1 crore each on Reliance Infrastructure, Reliance Power and Incredible Realcon, Rs 20 lakh on Paranjape Schemes (Construction) Ltd, Rs 14 lakh on PVP Ventures, Rs 5 lakh on Hindustan Cleanenergy and Rs 1 lakh on Ginni Filaments.

These firms have been directed to pay the fine within 45 days, the Securities and Exchange Board of India (Sebi) said in its 90-page order.

The matter pertains to the requirement of listed entities who have issued debt securities or other entities who have chosen to list their debt securities, to file No Default Statement (NDS) to the Credit Rating Agencies (CRAs).

Sebi's rule mandates the companies or issuers to submit the NDS information to CRAs on a monthly basis.

"The non-filing of NDS may have resulted in certain benefits to those issuers such as continuance or extensions of bank accommodations on loans or reduced cost of borrowings etc. It is an undisputable inference that the issuers could have gained such benefits by avoiding filing of NDS to CRAs, during times of financial stress," Sebi said.

Simply put, the noticees (seven entities) can choose not to file NDS during such stressful periods and dodge the CRAs from downgrading the debt securities based on the disclosures, it added.

In its order, Sebi mentioned that higher penalties have been imposed on Reliance Infrastructure, Reliance Power and Incredible Realcon as they raised huge debts, which exceeded Rs 500 crore.

The order came after Sebi conducted an examination with respect to non-submission of NDS or not providing certain information relating to default or delay in payment obligations etc to Credit Rating Agencies by companies that had gone for debt issuances.

During the course of examination, it was observed that several entities had not submitted NDS/information to CRAs as on May 20, 2019 and for June 1, 2019 to November 30, 2020, allegedly resulting in violation of provisions of Sebi rules.