The Anil D Ambani group on Saturday stepped up its fight against L&T Finance and Edelweiss over their move to invoke pledged shares and sell them in the open market.
The boards of three firms from the Reliance ADAG group — Reliance Power, Reliance Capital and Reliance Infrastructure — have decided to take legal action against L&T Finance and Edelweiss.
In separate regulatory filings, the companies said their respective boards met on Saturday to review the events of last week, which lead to a sharp fall in their market capitalisation and destruction of wealth.
L&T Finance and Edelweiss Group have refuted the allegations and have counter-alleged Reliance Group of failing to make timely payments, which they said necessitated sale of pledged shares.
Board decision
In its filing, Reliance Capital said its over 7 lakh shareholders have been impacted by what it termed as “illegal, motivated and unwarranted actions of L&T Finance”.
The financial services arm of Reliance ADAG said its board has recommended all appropriate legal steps to protect stakeholders.
Reliance Power separately said its board had reviewed the events leading to a sharp fall in market capitalisation and destruction of wealth. Its board also recommended and approved “all appropriate legal steps to protect its over 31.75 lakh stakeholders”.
Reliance Infrastructure blamed L&T Finance for market value erosion, saying it has impacted its over 8 lakh shareholders and said its board had approved legal action.
In its statement on Friday, Reliance ADAG had alleged that some NBFCs, “substantially L&T Finance and certain entities of Edelweiss Group, have invoked the pledge of listed shares of Reliance Group and made open market sales of the value of approximately Rs 400 crore from February 4-7”.
“The illegal, motivated and wholly unjustified action by the above two groups has precipitated a fall of Rs 13,000 crore, an unprecedented 55 per cent, in market capitalisation of Reliance Group over just these four short days,” it had said.
The group said the actions have caused substantial losses to 72 lakh institutional and retail shareholders, and had harmed the interests of all stakeholders.
Further, the group said that Reliance Capital, Reliance Infrastructure and Reliance Power as well as their various subsidiaries were performing satisfactorily on all operating parameters, and there was no change whatsoever in any aspect compared with the position prevailing prior to these sales.
The lenders had sold stocks of Reliance Communications (R-Com), Reliance Power, Reliance Capital and Reliance Infrastructure.
The developments followed an announcement by R-Com last week that it would be approaching the National Company Law Tribunal (NCLT) for resolution of debt.
A statement from the Anil Ambani group had alleged that the lenders’ action was illegal on various counts, including price manipulation, insider trading, front running and market abuse, and was in violation of various regulatory provisions. It, however, did not elaborate on what specific regulatory provision the sales had violated.
These charges were, however, refuted by L&T Finance and Edelweiss.
The Edelweiss group had said it had granted credit facilities against pledge of shares to the Reliance group and that over the last several months, it had reached out numerous times to the Anil Ambani group to address concerns on shortfall in margins (through regular margin call notices) and a resultant fall in collateral valuation.
L&T Finance had said that it had granted loans against pledge of shares to the Reliance group firms and that according to the loan and pledge agreements, the “borrower did not cure various events of defaults, including providing margin for shortfall in the stipulated security cover’’.
It also claimed that despite various notices in the past few months, the defaults continued and it had enforced its rights of invocation and sold the pledged shares to the extent of its outstanding dues by following the due process of contract and law.
