SEBI fines ₹1 cr on CARE Ratings in RCom case

Our Bureau Mumbai | Updated on July 27, 2020 Published on July 27, 2020

SEBI has imposed a penalty of ₹1 crore on CARE Ratings with regard to lapses in assigning credit rating to NCDs of Reliance Communications (RCom).

RCom defaulted on the repayment of principal amount of ₹375 crore and interest of ₹9.7 crore due in February 2017 and March 2017, respectively. At end-March 2017, RCom’s cash and equivalents were ₹1,400 crore – insufficient to pay for short-term debt of ₹10,900 crore. In May 2017, CARE had downgraded RCom's rating to default. SEBI found CARE to have failed to monitor the factors affecting the creditworthiness of RCom in a timely manner.

SEBI said CARE failed in initiating a review of its earlier ratings assigned to RCom even after the publication of third quarter of FY17 results.

The results showed a major decline in cash accruals affecting its credit profile and major development in the telecommunications industry with the entry of Reliance Jio denting the profit margins of all other players in the market, it added.

In addition, CARE also failed to take steps as prescribed under the norms, when it had not received a no-default statement (NDS) for the quarter ended December 31, 2017, from RCom despite its e-mail to the company in January 2017.

SEBI said CARE did not take into consideration the ratings downgrade of RCom's debt securities by Fitch and Moody's for conducting a review of its own ratings. CARE also failed to conduct a review despite being adequately triggered by several factors.

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Published on July 27, 2020
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