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Reliance Industries Fined By SEBI For Late Disclosure Of Jio-Facebook Deal

Reliance Industries has raised more than $20 billion in exchange for a 33% stake in Jio Platforms. Investors include Facebook and Google.

Reliance Fined by India Regulator for Late Meta Deal Disclosure
Reliance Fined by India Regulator for Late Meta Deal Disclosure

(Bloomberg) -- India’s market regulator imposed a combined penalty of 3 million rupees ($38,444) on Reliance Industries Ltd. and two company officials for failing to disclose information promptly about stake sale in one of its units to Meta Platforms Inc., Silver Lake Partners and Vista Equity Partners in 2020.

The Securities & Exchange Board of India initiated proceedings against billionaire Mukesh Ambani’s oil-to-retail conglomerate and its compliance officers, Savithri Parekh and K. Sethuraman, for alleged non-adherence to the fair disclosure principles around unpublished price-sensitive information, it said in a order on its website late Monday evening.

Reliance’s shares slipped as much as 0.6% during trading in Mumbai on Tuesday before recovering the losses. A Reliance Industries representative declined to comment on the regulatory action.

The penalty, although a small one, marks another instance of regulatory censure on the conglomerate helmed by Ambani, Asia’s richest person. The group raised more than $20 billion in exchange for a 33% stake in Ambani’s technology venture, Jio Platforms Ltd., that lured partners including Meta, then known as Facebook, and Google. Meta invested $5.7 billion in Jio Platforms in 2020.

As part of its probe on stake sales in Jio Platforms, SEBI order said that there was a lot of news flow around Meta investing in Reliance’s digital unit in March and April, 2020, prior to the corporate announcement on April 22. A March 24, 2020 news report on this deal by Financial Times was widely circulated in Indian media but Reliance and its compliance officers did not issue any clarification on the development.

SEBI regulations require that “the listed entity may on its own initiative also, confirm or deny any reported event or information” to stock exchanges, according to the order.

One Day Late

Reliance announced on May 4 that Silver Lake Partners would invest about $753 million in Jio Platforms and on May 8, about Vista’s $1.5 billion investment. These two stake sales were announced one day later than the stipulated window of disclosures, the order said.

“Companies would be unsure on the timing of making crucial disclosures, and on responding to speculation in media,” said Shriram Subramanian, founder of proxy advisory firm InGovern Research Services Pvt. Ltd. “While PIT (prohibition of insider trading) regulations need to be taken seriously by companies and the principle of “when in doubt, disclose” applies, companies may also find it hard to disclose at the time of crucial negotiations in transactions.”

The SEBI order acknowledges that these transactions were finalized during “highly uncertain times of Covid-19” that made it hard to know that a deal was done “until the signatures of the counterparty were actually received.”

SEBI had last year ordered Ambani and Reliance to pay a combined penalty of 400 million rupees for allegedly violating share-trading rules about 13 years ago. That led to undue profits from the sale of shares in Reliance Petroleum Ltd., a former unit, in the cash and futures markets, the regulator had said in its order then. 

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