Anil Dhirubhai Ambani Group (ADAG) officials said that Reliance Infra and Reliance Natural Resources Limited (RNRL) have settled the Securities and Exchange Board of India (SEBI) probe through voluntary terms proposed by them and that the regulator did not impose any ban on the companies or their directors.
“It is a voluntary offer from our side to put an end to this litigation, which SEBI has accepted. There is no bar or ban imposed by SEBI on the company and its directors,” a company spokesperson told VCCircle.
Earlier on Friday, SEBI passed a consent order to settle a probe into alleged violation of regulations for foreign investment and unfair trade practices by two Ambani-headed Reliance Group companies- Reliance Infrastructure Ltd. and Reliance Natural Resources Ltd. The companies were believed to have used loans raised abroad to invest in the stock market through overseas companies. Reliance Natural Resources later merged with Reliance Power Ltd., another group company.
According to SEBI order, Anil Ambani, Reliance Infra Vice Chairman, Satish Seth and three board directors Lalit Jalan, SC Gupta and JP Chalsani, are not allowed to invest in publicly-listed securities till Dec 2011. Also the R-Infra and RNRL cannot invest in secondary market till 2012.
RInfra shall also stay away from investing in the secondary markets for an additional year, until December 2012, under the agreement.
The spokesperson said that the settlement isn't an admission or denial of guilt, but was being made in the interests of investors to pre-empt "unnecessary and time-consuming litigation".
A company spokesperson added that the two group companies and five individuals volunteered not to invest in the secondary markets, which was agreed to by the regulator as part of the settlement. The regulator, however, allowed the companies and the five individuals to participate in primary issues, buybacks and open offers during the period mentioned.
The company spokesperson said that Anil Ambani and the four others—Satish Seth, S.C. Gupta, Lalit Jalan and J.P. Chalsani—"voluntarily" paid a settlement fees (and not penalty) of Rs 50 crore "with no burden" on the company.
However, observers disagree. “Since the company has gone for the consent order and has agreed to the penalty as well, there have been certain wrong doings within the financial statements and the matter is serious enough. This will have a negative impact on the company," an analyst told VCCircle on conditions of anonymity.
Meanwhile, the SEBI said its investigations revealed that both Reliance Infrastructure and Reliance Natural Resources were responsible for misrepresenting the nature of investments in their annual reports for the fiscal years through March 2007, 2008 and 2009.
The regulator said it accepted the settlement on the condition that the two companies will rotate their auditors, with a gap of three years between two audits by a single auditor. Post the settlement, it has disposed off the proceedings against the companies and the individuals.
Reliance Infrastructure said the settlement maintains full financial flexibility of the company to implement its projects.
Shares of Reliance Infrastructure closed 1.4% down at Rs 798.25, while those of Reliance Power ended 1.1% down at Rs 146.90 on the Bombay Stock Exchange, compared with a 1.7% fall for the benchmark Sensitive Index.