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Sebi Slaps Rs 10 Lakh Fine on DLF for Wrong Disclosure of IPO Fund Utilisation

The order follows an investigation conducted by the regulator for the June-December, 2007 period to ascertain any possible violation of the regulations.


Updated:May 31, 2018, 8:15 PM IST

New Delhi: Markets regulator Sebi on Thursday imposed a penalty of Rs 10 lakh on realty major DLF for making "wrong disclosures" with regard to utilisation of funds raised through initial public offer.

The order follows an investigation conducted by the regulator for the June-December, 2007 period to ascertain any possible violation of the regulations.

Sebi said it found the company to have made "wrong disclosures" to stock exchanges -- BSE and NSE-- regarding utilisation of funds in respect of prepayment of loans pertaining to the September 2007 quarter.

The realty giant in its filing for the September 2007 quarter to the exchanges had reported that it utilised Rs 3,143.56 crore towards prepayment of loans, the Securities and Exchange Board of India (Sebi) noted in its 18-page order.

However, as per the filing for December quarter 2007, DLF had shown the utilisation of funds under the same head -- prepayment of loans -- as Rs 2,469.75 crore, which was decremental as compared to the previous quarter, Sebi said.

According to DLF, it had clubbed Rs 673.81 core from non-IPO proceeds with Rs 2,469.75 core of IPO proceeds towards prepayment of loans for the quarter ended September, 2007.

In its submission before Sebi, the company later said "such aggregation was an inadvertent error".

DLF also said that when the IPO Monitoring Agency, during the course of their audit, highlighted this error, the company subsequently rectified the statement of utilisation of proceeds in its disclosures to the stock exchanges, which it said was "completely voluntary and in the interest of fair and complete disclosure".

Sebi, however, said that DLF did not have proper control mechanism to monitor initial share-sale funds in terms of either segregating IPO funds in a separate bank account or putting in place a check and balance in their consolidated accounting software system, which if done would have resulted in identification and monitoring of IPO funds and thus avoided wrong disclosure.

The regulator also said that from the subsequent filing for December 2007 quarter wherein the amount utilised towards prepayment of loans was rectified and shown as Rs 2,469.75 crore, there was no explanatory statement furnished by the company as to how the figures got decreased compared to the previous quarter.

"It is established that the noticee had made wrong disclosures for the quarter ended September 2007 to BSE and NSE regarding utilization of funds in respect of prepayment of loans due to its facetious approach," Sebi Adjudicating Officer B J Dilip said.

"I conclude that the noticee (DLF) by making wrong disclosures as regards variation in projected utilisation of funds vis-a-vis actual utilisation of funds for the quarter ended September 2007, had violated the provisions of ... the Listing Agreement," he added.

According to Sebi norms, a company is required to make disclosures on a quarterly basis to stock exchanges indicating the variation between projected utilisation of funds and the actual utilisation of funds under the Listing Agreement.

DLF had made a public issue of 17.50 crore equity shares during June 11-14, 2007 at a price of Rs 525 per share, for raising Rs 9,187.50 crore.

As per the prospectus, one of the objects of the issue was prepayment of loans of the company to the tune of Rs 1,928.10 crore.

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