Mumbai: Capital markets watchdog Sebi today sought four weeks to respond to Reliance Industries’ petition challenging its decision to slap a penalty of Rs 13 crore on the company in a case related to disclosure of a key earnings ratio.
Reliance has filed a petition challenging the Sebi decision at the Securities Appellate Tribunal (SAT). The next hearing in the matter has been posted for December 11.
Sebi slapped the fine on RIL on August 8, 2014, and asked the company to pay the penalty within 45 days of the order.
The penalty includes a fine of Rs 1 crore for violating the listing agreement and another Rs 12 crore for violating the Securities Contracts (Regulation) Act in a matter related to alleged non-disclosure of the diluted earnings per share (DEPS) in the quarterly and annual financial filings by the company.
The order followed a probe by Sebi in an over seven-year-old case involving alleged irregularities in the 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 country’s largest private sector company repeatedly failed to disclose such dilution in earnings for as many as six quarters.
“We are now studying the order as to the interpretation Sebi has taken and would take appropriate action based on legal advice,” an RIL spokesperson had said on August 8 after the Sebi order.
“The issue relates to the method of calculation of diluted EPS under the accounting standards. The issue is not of non-disclosure,” the company had said.
“It can be observed from our results published by the company of all the quarters in question that both basic and diluted EPS have been disclosed,” RIL had said, while releasing its financial results for the six quarters concerned to substantiate its claims on basic and diluted EPS.
In its 15-page order, Sebi said RIL 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.”
However, Sebi 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.”