Markets regulator Securities and Exchange Board of India today imposed a penalty of Rs 10 lakh on Tata Steel Ltd. for the delay in making necessary disclosures about its increased shareholding in a group firm.
In an order passed today, SEBI noted that the Tinplate Company of India Ltd. had announced issuing 4.3 crore shares to its existing shareholders on a rights basis in September 2009. This was along with an issue of 1.79 crore fully convertible debentures in the ratio of 5 debentures for 8 equity shares.
The market watchdog observed that as part of the rights entitlement, Tata Steel was allotted 1.33 crore equity shares and 55.4 lakh fully convertible debentures. Further, in accordance to its undertaking Tata Steel was also allotted an additional 86.7 lakh equity shares and 1.17 crore fully convertible debentures.
- On October 12, 2009, Tinplate allotted 2.19 crore shares to Tata Steel as part of the rights entitlement. This increased Tata Steel's stake in Tinplate to 42.8 percent from 30.8 percent earlier.
- Tata Steel was required to make the necessary disclosures within two working days to Tinplate under SEBI’s regulations. However, it was alleged Tata Steel made the said disclosures belatedly on July 2, 2012.
- On April 1, 2011, Tinplate again allotted 3.13 crore shares to Tata Steel which increased the steelmaker’s stake to 59.4 percent. Tata Steel disclosed the rise in stake only on May 13, 2011.
- Subsequently, Tata Steel's stake in Tinplate rose to 73.44 percent in September 2012 following an open offer, and further to 74.96 percent in May 2014 after a scheme of amalgamation, but timely disclosures were made for these.
Tata Steel’s Response
Regarding the alleged lapses in first two cases, Tata Steel submitted before SEBI that there was no actual or effective breach of the disclosure requirements as the underlying purpose of the regulations was fulfilled by virtue of the information being present in the public domain.
Noting that Tata Steel has admitted the violation by making the prescribed disclosures with a delay on both occasions, SEBI said it does not "find any merit in the submissions of the notice that no irreparable harm or injury has been occurred either to investors or to the public at large dealing in securities due to the said delayed disclosures".
It further said that Tata Steel's submissions reiterated these points and suggested that the lapse on its part was technical in nature and the same should be condoned or a nominal penalty may be imposed on it.
The adjudicating officer for the case said that any quantifiable gain or unfair advantage for Tata Steel, or the extent of losses suffered by investors due to the delay could not be computed. However, the defaults were “repetitive in nature”.
As regulations seek to ensure fair treatment by mandating timely and adequate disclosures to enable investors make an informed decision, Tata Steel was found to be liable for monetary penalty by failing to make the necessary disclosures within the prescribed timelines, SEBI's order said.
Tata Steel currently holds nearly 75 percent in Tinplate, a separately listed group firm, which is among the country's largest producer of tinplate and its products are used for canning and packaging of processed foods, paints, beverages, dairy and other products.