Sebi Warns TCS Over Disclosure Of Material Information To Investors

Sebi has warned Tata Consultancy Services to be careful in dealing with disclosure of material information to investors after the watchdog found that the IT major did not prominently display the extent of damages related to a case in the US.

The regulator has also asked the company to ensure that disclosures provide adequate, accurate, explicit and timely information to the investors.

On April 16, 2016, TCS made a disclosure to the stock exchanges regarding a US court verdict related to an intellectual property rights case with Epic Systems.

According to Sebi, the disclosure indicated that TCS had received a jury verdict in lawsuit filed by Epic Systems in the court of Western District Madison, Wisconsin.

While the disclosure did not mention the $940 million penalty imposed against TCS as part of the verdict, the said amount was shown as part of contingent liabilities when the the company announced its financial results on April 18, 2016, according to Sebi.

In another disclosure made on October 1, 2017, TCS specifically mentioned that the court significantly reduced the compensatory and punitive damages of $940 million to $420 million, Sebi said in a letter to the company.

The letter, dated May 28, was submitted to the stock exchanges on Friday.

"The damages are substantial, more so when seen in comparison to Rs 24,292 crore net profit of TCS (consolidated) for FY'16. The disclosures made by TCS to stock exchanges on April 16, 2016 should have prominently displayed the extent of damages to enable investors to assess the impact of the jury's verdict on the financials of the listed entity," Sebi noted.

Further, the regulator said such an act goes against the spirit of Sebi rules that requires listed entities to ensure that the disseminations made by them are adequate, accurate, explicit, timely and presented in a simple language to the investors.

"In view of the above, you are hereby warned to be careful in dealing with disclosure of material information in the future and to ensure that the disclosures provide adequate, accurate, explicit and timely information to the investors. You are advised to exercise proper due diligence in future and avoid recurrence of such instances," Sebi said.

Also, Sebi has advised TCS to place the letter before its board.

TCS, the country's largest software exporter, is listed on BSE and NSE.