SEBI Default Disclosure Norms Reveals Stark Reality

SEBI default disclosure norms reveals stark reality

Insolvency-hit Reliance Communication along with Jaypee Infratech, Religare Enterprises, Hindustan Construction Company, Suzlon Energy and others have reported debt defaults in keeping with the Securities and Exchange Board of India’s tighter disclosure norms.

There are as many as 49 listed companies have disclosed their defaults to align with the market regulators norm.
Last November SEBI mandated listed entities to disclose any default in repayment of principal or interest to lenders, which continues beyond 30 days from the pre-agreed payment date to shareholders within 24 hours of such an event.

The rule kicked in from 1 January.
The default for these companies includes non-repayment of term loans, defaulting on nonconvertible debentures (NCDs), dues related to fund-based working capital, non-fund based working capital and standby letter of credit among others.

There are fears that lot of skeletons will fall out of the closet in near terms. Disclosures done by Reliance Naval & Engineering (Rs 9,491 96 crore), Reliance Power (Rs 685 crore), National Steel & Agro Industries (Rs 1,134.8 crore), Reliance Communication (Rs 32,575 crore), Suzlon Energy (Rs 7,256 crore), Jaypee Infratech (Rs 6,721 crore) are sending shivers among lenders and investors alike.

Suzlon’s dues were to be repaid on 19 March 2019, which is a loan given to the energy company by a consortium of 18 banks led by State Bank of India (SBI) and Indian Renewable Energy Development Agency (IREDA).

Jaypee Infratech availed debts from various lenders including IDBI Bank, LIC, Corporation Bank and others.
These disclosures are aimed at addressing the information asymmetry currently existing in the public markets to a fair extent.

Meanwhile, the current SEBI norm is less drastic than the previous attempt, which triggered the disclosure of default of one rupee for one day.

These default disclosures will strain the finances of lenders who according to the RBI require additional capital of close to Rs 26,000 crore.

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