RIL refutes report regarding Sebi fine over `non-disclosure’

Reliance Industries Ltd (RIL) has refuted a report attributed to news agency PTI that market regulator Sebi had earlier in August imposed a Rs13-crore penalty on the company for non-disclosure of ''a key earnings ratio'' in its published results for six quarters in the past.

RIL has reiterated that the report is inaccurate and the issue is about accounting standards and not non-disclosure as such.

''The issue relates to the method of calculation of diluted EPS under the Accounting Standards. The issue is not of non-disclosure,'' RIL stated.

''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 (please see relevant line on basic and diluted EPS in the enclosed media releases relating for 6 quarters),'' it added.

RIL said the company in its arguments and written submission had brought out all the relevant clauses of the accounting standards to substantiate why basic EPS and diluted EPS were same in all the quarters (See: RIL says Sebi wrong to impose Rs13-cr non-disclosure fine).

''We are now studying the order as to the interpretation Sebi has taken and would take appropriate action based on legal advice.''

Sebi had imposed the penalty following a probe in an over seven-year old case involving alleged irregularities in issuance of 120 million warrants by Mukesh Ambani-led RIL to its promoters entitling its holders to subscribe to equivalent number of equity shares of RIL, according to the report.

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 a key earnings ratio for as many as six quarters.

Subsequently, Sebi began adjudication proceedings to probe the alleged violation of relevant clauses of the Listing Agreement and the Securities Contracts (Regulation) Act (SCRA) for not disclosing to stock exchanges the diluted earnings per share (DEPS) as prescribed for the quarterly and annual disclosures, the regulator said in its 15-page order.

Sebi had served a show-cause on RIL in February last year, listing out allegations against the company. After looking into the company's reply and further probe into the matter, Sebi said that "EPS (Basic or Diluted) is a vital factor or one of the fundamental tools for the investors while arriving at decision to continue or invest in the shares of a particular company.

The regulator said further that RIL "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".

"In view of aforesaid observations, facts and records of the case", Sebi said, the company was in violation of the relevant provisions of the Listing Agreement and the SCRA and therefore it was liable to a penalty.

Noting that a specific quantum of any direct or indirect unfair gain made by RIL and the loss caused to the investors were not available on records, Sebi said, "the fact cannot be ignored that millions of shareholders/investors were deprived of correct disclosures about DEPS."

"As regards the repetitive nature of default, as observed above that the Noticee had failed to disclose the DEPS repetitively for the six quarters. Hence, an appropriate penalty needs to be imposed upon the Noticee, taking into account the aforesaid gravity of the violations committed," Sebi said.