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Securities and Exchange Board of India Penalizes Seven Companies

The Securities and Exchange Board of India (SEBI) has imposed penalties on seven companies, including Reliance Infrastructure, Reliance Power, and Incredible Realcon, for failing to submit no-default statements (NDS) and other required information to credit rating agencies (CRAs).

Each of the three companies received a fine of ₹1 crore after SEBI found that they had raised substantial debts exceeding ₹500 crore.

Four other companies received smaller penalties due to their lower debt levels. Paranjape Schemes (Construction) Limited was fined ₹20 lakh, PVP Ventures Limited was fined ₹14 lakh, Hindustan Cleanenergy Limited received a ₹5 lakh fine, and Ginni Filaments Limited was fined ₹1 lakh.

SEBI Adjudication Officer G Geetha issued the penalties after discovering that certain companies had failed to submit their NDS to CRAs for various months between 2019 and 2020.

On May 19, 2022, SEBI issued a notice to 41 companies under Rule 4(1) of the SEBI Adjudication Rules, requiring them to explain why an inquiry should not be initiated against them and why they should not be penalized for violating Regulation 8 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Seven companies were found to have violated Regulation 8, which mandates that listed entities must cooperate with and provide accurate and sufficient information to SEBI-registered intermediaries, including CRAs. Additionally, a SEBI circular issued on June 30, 2017, requires companies with listed debt securities to submit NDS to CRAs on a monthly basis.

The NDS submissions are critical for CRAs to monitor and accurately assign credit ratings to companies with listed debt securities. If CRAs are informed of delays or defaults in debt repayments, the affected companies risk having their credit ratings downgraded. By not filing NDS during financial stress, companies can avoid potential downgrades, thereby securing benefits such as extended bank accommodations and reduced borrowing costs.

Securities and Exchange Board of India concluded that the failure to file NDS could have allowed the companies to gain undue advantages during financially stressful periods.

The seven companies have been given 45 days to pay the penalties. Failure to do so will result in SEBI initiating recovery proceedings under Section 28A of the SEBI Act, which may include the attachment and sale of movable and immovable properties to realize the penalty amount and accrued interest.

“It is an indisputable inference that the issuers could have gained such benefits by avoiding filing of NDS to CRAs during times of financial stress,” the Securities and Exchange Board of India order stated.

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