SEBI warns Anil Agarwal’s Vedanta, HZL over non-compliance with disclosure norms

NEW DELHI, (PTI): Markets regulator SEBI has warned billionaire Anil Agarwal’s Vedanta Ltd and Hindustan Zinc Ltd (HZL) over non-compliance with certain disclosure norms, saying it will take action if such actions were repeated in future.

The Securities and Exchange Board of India (SEBI) flagged Vedanta executing Rs 1,407 crore of related party transactions with associate company HZL without prior approval of the audit committee and HZL’s failure to inform shareholders of deferment of meeting relating to price-sensitive dividend payment.

In an October 28 warning letter, which Vedanta as per SEBI directions disclosed to stock exchanges, the regulator said it will take action if such actions were repeated in future.

The mining conglomerate’s independent auditors had in Vedanta’s annual report for fiscal year 2020-21 flagged related party transactions.

”With regard to the qualified opinion in respect of the company executing related party transactions worth Rs 1,407 crore without prior approval of the audit committee, the company has submitted that the said transaction was ratified later (after a period of about 47 days),” SEBI said in the October 28 letter.

Without disclosing the nature of the transaction, the company stated that the transaction was done at an arm’s length and in ordinary course of business.

In an October 29 letter to HZL, SEBI said the company had scheduled a meeting of its board on August 17, 2021 to consider interim dividend for 2021-22. This was deferred on August 17 without assigning any reason or indicating a tentative date for the next board meeting.

”The closing price of the scrip shot up from Rs 316.05 on August 11 (date of announcement of board meeting) to Rs 331.1 on August 16 (the day before the scheduled board meeting) and subsequently fell down to Rs 317.5 on August 17 (after deferment of the board meeting),” SEBI said.

”Considering that the board meeting scheduled on August 17, 2021 was supposed to consider a price-sensitive agenda, the company must have disclosed the reasons for deferment of such meeting, to the investors,” SEBI said adding the audit committee and the board subsequently met on October 22, 2021 for financial results but there was no mention of interim dividend in the outcome of the meeting.

SEBI said regulations require listed entities to provide adequate and timely information to investors.

”It is evident from the sequence of events that the company has failed to comply with the principles specified in the SEBI LODR,” it said. ”The company is advised to provide necessary updates to the investors on the issue discussed above.”

”In this regard, attention may be drawn to Regulation 23(2) of SEBI (LODR) Regulations, 2015, which states that all related party transactions shall require prior approval of the audit committee,” SEBI said.

”Accordingly, the submission of the company that the transactions were done at arm’s length distance is not tenable.” On the auditor’s observation over delay in disclosure of the outcome of board meeting of October 3, 2020, the company submitted that the delay was due to unforeseen circumstances and that it will ensure that the same is not repeated.

”The aforesaid non-compliances are viewed seriously. You are hereby warned and advised to ensure compliance with all applicable provisions of SEBI Regulations,” the regulator said in the letter. ”Any such aberration in future would be viewed seriously and appropriate action would be initiated.” SEBI asked Vedanta to place its letter before the company’s board of directors and disseminate the same to stock exchanges.

Vedanta in the filing said that the firm’s board at its meeting held on October 29 took note of the SEBI letter.

The board ”has advised the company to ensure adherence to all applicable provisions,” it said. ”We would also like to state that the company has always been meticulous in complying with all the provisions of the Companies Act and SEBI Regulations and will continue to do so.”

Responding to SEBI letter, HZL said it has ”always been meticulous in complying with all the provisions of the Companies Act and SEBI Regulations and will continue to do so.” (PTI)