SEBI fines Reliance Infra, Power, five others for failing to submit information to credit rating agencies

The Securities and Exchange Board of India (SEBI) has imposed penalties on seven companies including Reliance Infra, Reliance Power and Incredible Realcon for failing to submit no-default statements (NDS) and other information to credit rating agencies (CRAs)..A fine of ₹1 crore each was levied on each of the three companies after SEBI observed that huge debts exceeding ₹500 crore were raised by them.Four other violators were given a lesser penalty, considering that the debts raised by them were less. Paranjepe Schemes (Construction) Limited was fined ₹20 lakh, PVP Ventures Limited was given a ₹14 lakh fine, Hindustan Cleanenergy Limited was given a ₹5 lakh fine and Ginni Filaments Limited was asked to pay ₹1 lakh..SEBI Adjudication Officer G Geetha passed the order on finding that certain companies had failed to submit their NDS to CRAs for certain months between the years 2019 to 2020.A notice dated May 19, 2022 was issued against 41 companies under Rule 4(1) of the SEBI Adjudication Rules to show cause as to why an inquiry should not be initiated against them and why penalty should not be imposed for violation of Regulation 8 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.Out of these companies, seven were found to have violated the provisions of Regulation 8. Regulation 8 requires a listed entity to cooperate with and submit correct and adequate information to the intermediaries registered with SEBI, which includes registered CRAs. The SEBI also issued a circular on June 30, 2017 requiring the submission of NDS to CRAs on a monthly basis by companies with listed debt securities.The information contained in an NDS is required to be submitted to the CRAs to enable them to accurately monitor and assign credit ratings to companies that list debt securities. If CRAs are informed of delays or defaults in debt repayments by companies by their NDS, such companies stand the risk of having their credit ratings downgraded.In other words, by omitting to file such NDS during times of financial stress, a company may dodge the CRAs from downgrading their debt securities based on the disclosures made in an NDS..The SEBI found that by not filing NDS, the erring companies may have secured certain benefits such as continuance or extensions of bank accommodations on loans, 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," the order stated.It held that seven companies were held liable to be penalised for violation of these legal requirements..SEBI has given 45 days to the erring companies to pay the penalty amount."In the event of failure to pay the said amount of penalty within 45 days of the receipt of this Order, SEBI may initiate consequential actions including but not limited to recovery proceedings under Section 28A of the SEBI Act for realization of the said amount of penalty along with interest thereon, inter alia, by attachment and sale of movable and immovable properties," the order concluded..[Read Order]