SEBI's warning to OLA Electric: Corporate Disclosure Practices

The Securities and Exchange Board of India (“SEBI”) on January 7, 2025, issued a warning to Ola Electric Mobility Limited (the “OLA Electric”) for violating the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “LODR Regulations”). Ola Electric disclosed material information about its business expansion plans on social media before informing the stock exchanges, contravening the requirement for equal and timely disclosure to all stakeholders.

On December 2, 2024, Ola Electric’s Chairman and Managing Director, Bhavish Aggarwal, announced the company’s plan to expand its network of stores via the social media platform X (previously “Twitter”) at 9:58 AM. The same information was disclosed to the stock exchanges later in the day—at 1:36 PM on the BSE and 1:41 PM on the NSE. This delayed disclosure violated key LODR Regulations, which mandate that material information must be disclosed to stock exchanges first and promptly.

The LODR Regulations mandate listed entities to disclose material information promptly to stock exchanges, ensuring equal access to critical information for all stakeholders. The purpose of these norms is to foster transparency, protect investor interests, and enable informed decision-making.

SEBI, in view of the breach, issued a warning letter to Ola Electric on January 7, 2025, emphasizing the need for compliance (the “Warning Letter”). The following are the violations pointed out in the Warning Letter:

(a) Regulation 30(6): Timely Disclosure of Material Events

Regulation 30(6)(ii) mandates listed entities to first disclose to stock exchanges all events or information that are ‘material’ in terms of the provision of Regulation 30 of the LODR “as soon as reasonably possible and, in any case, not later than twelve hours from the occurrence of the event, in case the event or information is emanating from within the listed entity."

SEBI noted that Ola Electric announced its plans, for a four-fold expansion of its company-owned stores, on X at 9:58 AM on December 2, 2024, while the information was disclosed to stock exchanges only at 1:36 PM (BSE) and 1:41 PM (NSE). This delay was observed to have constituted a clear breach of Regulation 30(6).

(b) Regulation 4(1)(d): Adequate and Timely Information

Regulation 4(1)(d) requires listed entities to provide adequate and timely information to both stock exchanges and investors. The delay in reporting the information on its business expansion to the stock exchanges was observed to be a violation of Ola Electric’s obligation under Regulation 4(1)(d) by SEBI.

(c) Regulation 4(1)(f): Equal and Cost-Efficient Access to Information

SEBI emphasized that channels for disseminating information must ensure equal, timely, and cost-efficient access for all investors. By failing to disclose the information to the exchanges before publishing it on a public platform, Ola Electric was found to have failed in providing equal and timely access to the information for all investors, as the investors who were not on X were deprived of the opportunity to act on the information simultaneously.

(d) Regulation 4(1)(h): Adherence to Obligations in Letter and Spirit

Regulation 4(1)(h) requires listed entities to make disclosures in the interest of all stakeholders and to follow their obligations both in letter and spirit. SEBI observed that Ola Electric’s choice of X as the primary channel of disclosure failed to consider the interests of all stakeholders, and follow its obligations in letter and spirit.

SEBI viewed these violations as serious lapses in compliance. The regulator stressed the importance of adhering to disclosure norms to uphold market integrity and protect investors. SEBI’s warning underlined several implications:

(a) Timely and fair disclosures are critical to maintaining investor trust. When companies prioritize selective platforms, such as social media, over official channels like stock exchanges, it creates disparities in information access, which can erode investor confidence in the fairness of market operations.

(b) By circumventing the prescribed disclosure channels, Ola Electric’s actions could have led to an imbalance in the market. Investors with access to the information on X before its official disclosure to stock exchanges may have had an undue advantage, potentially impacting stock prices and trading volumes.

(c) The Warning Letter emphasized the broader issue of corporate governance. A failure to comply with disclosure obligations could reflect poorly on a company’s commitment to transparency and accountability. SEBI’s directive to Ola Electric to take corrective measures and report them to its board of directors highlights the role of internal governance in ensuring compliance.

As businesses increasingly leverage social media for corporate communication, it is imperative to ensure compliance with established regulatory norms to prevent information asymmetry and maintain a level playing field for all stakeholders. Ola Electric’s lapse, while a cautionary tale, also serves as an opportunity for other companies to reassess and strengthen their disclosure practices. By aligning their communication strategies with the principles of transparency and accountability enshrined in the LODR Regulations, companies can not only avoid regulatory scrutiny but also build lasting trust with investors and regulators alike.

About the authors: Varnika Sharma is a Partner and Satyajit Nair is an Associate at Poovayya & Co.

If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.