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Anil Ambani cos allege illegal pledged share sale Accuse Edelweiss, L&T Arms Of Wrongly Offloading Stocks, Fin Cos Deny Charges

February 09, 2019 04:59 AM

COURTESY TOI FEB 9

Anil Ambani cos allege illegal pledged share sale
Accuse Edelweiss, L&T Arms Of Wrongly Offloading Stocks, Fin Cos Deny Charges
Partha.Sinha@timesgroup.com

Mumbai:

A war of words has broken out in India Inc involving three leading business groups with allegations of “breach of trust” and veiled legal threats.


Anil Ambani’s Reliance conglomerate on Friday accused financial arms of Edelweiss and L&T of illegally selling promoters’ shares in four of its group companies in the open market, causing a steep fall in their value. Edelweiss and L&T Finance denied any illegality and said all rules were followed while selling these shares. The four Anil group companies whose shares plunged by over 50% this week, causing a market capitalisation loss of about Rs 13,000 crore, are Reliance Communications, R-Power, R-Infrastructure and R-Capital.

The Reliance Group, meanwhile, removed Edelweiss as one of the lead merchant bankers to manage the IPO of Reliance General Insurance following selling of pledged shares. However, sources said Edelweiss had walked out of the IPO deal since it did not “find any value in it”. Reliance General Insurance has filed an offer document with Sebi.

Reliance Power said L&T Finance and certain entities of Edelweiss Group, among others, sold pledged shares of group companies in the open market for about Rs 400 crore. “The illegal, motivated and wholly unjustified action by the two groups has precipitated a fall of Rs 13,000 crore, an unprecedented nearly 55%, in market capitalisation of Reliance Group over four days, causing substantial losses to 72 lakh institutional and retail shareholders, and harming the interests of all stakeholders,” R-Power said in a statement. The company alleged that the way these shares were sold could be termed as “price manipulation, insider trading, front-running and market abuse”, and were in violation of various regulatory provisions.

The shares sold were once pledged by Ambani and his associates to borrow money from arms of Edelweiss and L&T, among others. According to Edelweiss, since the stock prices of these shares had fallen sharply in the last few months, the total value of promoters’ shares — which were pledged with these entities to avail of the loan — was less than the loan amount.

In its statement, Edelweiss refuted Reliance Group’s allegations, calling it “entirely unfounded, baseless and false”. It said that despite their best efforts and opportunities given to the Ambani-controlled group for a remedy, “not only did Reliance Group fail to address any of the concerns raised by Edelweiss Group, but also continued to breach contractual obligations”. Throughout the process, Edelweiss had acted in a lawful and responsible manner, it said.

L&T Finance too refuted the allegations made by Reliance Group, relating to sale of pledged shares of that group. The financier had given loans against pledge of shares to Reliance Group companies and under loan and pledge agreements, “the borrower did not cure various events of defaults, including providing margin for shortfall in the stipulated security cover”. “Despite various notices in the past few months, events of defaults continued. Consequently, L&T Finance enforced its rights of invocation and sold pledged shares to the extent of its outstanding dues by following the due process of contract and law,” the company said.

 

 
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