Securities and Exchange Board of India has imposed a penalty of Rs 1 crore on CARE Ratings over lapses in due diligence in the Reliance Communications (RCom) case.
As per SEBI, the case pertains to default by RCL on the repayment of the principal amount of Rs 375 crore and interest of Rs 9.7 crore due on February 7, 2017, and March 7, 2017. Delayed payment on the same was made on April 10, 2017.
Sebi said CARE failed to monitor the ratings and factors affecting the creditworthiness of the issuer in a timely manner, resulting in a significant delay in conducting the rating process and downgrading the rating.
The rating agency failed to initiate a review of its earlier ratings assigned to RCL even after the publication of Q3 FY2017 results, which inter alia showed a major decline in cash accruals affecting its credit profile.
Care Ratings had not even followed up with RCL for NDS (No Default Statement) despite it being a crucial document for conducting a review of quarterly financials of an entity.
Considering all the facts and circumstances of the case, a penalty of worth Rs 1,00,00,000 has been imposed on Care Ratings, the Sebi order said.
The amount of penalty must be paid either by way of demand draft in favour of 'SEBI - Penalties Remittable to Government of India', payable at Mumbai, or by online payment.
In the event of failure to pay the said amount of penalty in 45 days of the receipt of this order, consequential proceedings including, recovery proceedings may be initiated by attachment and sale of movable and immovable properties, the order said.