Anil Ambani group calls heavy selling ‘motivated’
L&T Finance, Edelweiss refute allegations, say had no option but to sell pledged shares.
The lenders refuted the allegations in strongly-worded responses of their own saying that the Reliance Group companies did not fulfil contractual obligations and that frequent defaults by the borrower left them with no choice.
Shares of the Anil Ambani group companies wilted under heavy selling pressure this week after Reliance Communications had announced its decision to move the insolvency tribunal for bankruptcy protection. Since February 4, Reliance Communications has plunged 54%, Reliance Power has declined 59%, Reliance Capital has lost 32% while Reliance Infra has dropped 56%.
The fall prompted lenders to sell pledged shares, with L&T Finance selling 20 million shares of Reliance Communications, 7.8 million shares of Reliance Capital, 4.9 million shares of Reliance Infrastructure and 62.5 million shares of Reliance Power, on Thursday. The selling data of Edelweiss is not available on the exchange websites.
The Reliance Group alleged that the sale was “illegal and excessive”, and against the process and requirements of the respective borrowings' documentation.
“The manner of conduct of the above open market sales, without any attempts whatsoever at orderly market disposal through a bid or structured process for shares comprising the holding of the promoter group, is also illegal on several counts, including amongst others, price manipulation, insider trading, front running and market abuse, and is in violation of various regulatory provisions… which are applicable to all persons (including NBFCs) dealing in listed securities, whether on invocation of pledge or otherwise,” a release from the group said.
NOTHING ILLEGAL ABOUT SALE: LENDERS
On Friday, the group’s shares gained anywhere between 5% and 12%.
L&T Finance and Edelweiss defended their actions saying they sold pledged shares as per the law.
“As per loan and pledge agreements, borrower (Reliance Group) did not cure various events of defaults including providing margin for shortfall in the stipulated security cover,” L&T Finance said in a statement. “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.”
Edelweiss too said that the sale was prompted by fall in collateral value and failure of promoters to fulfil contractual obligations. “On 4th February 2019, there was a sharp drop in the prices of Reliance ADAG group shares, which led to further erosion in the collateral value. Edelweiss group once again gave due opportunity for remediation. Since there was no response from Reliance ADAG Group, it necessitated liquidation of the collateral as per the agreed contractual terms.”
Reliance Group was earlier known as Reliance Anil Dhirubhai Ambani Group (ADAG).
Indian markets have been roiled in recent weeks by troubles associated with promoters who had pledged their holdings in bigger listed companies to raise money for personal investments. Zee group’s Subhash Chandra reached a deal recently with lenders not to trigger default and give him time till September to repay them disposing off assets.
The trigger for the slump was Reliance Communications’ statement last Friday announcing its decision to file for bankruptcy as it’s been unable to sell assets to repay debt over the past year and a half. The company has debt of about Rs 42,000 crore. On Monday, RCom approached National Company Law Appellate Tribunal (NCLAT) to withdraw its appeal against a May 2018 National Company Law Tribunal (NCLT) order that had admitted bankruptcy proceedings. The tribunal ruled that RCom cannot sell movable or immovable assets without permission of either the Supreme Court or the tribunal till further orders.