Our Bureau The Anil Ambani-promoted Reliance Group (ADAG) on Friday alleged that the action of a few NBFCs — L&T Finance and certain entities of the Edelweiss Group — of invoking the pledge of the Group’s listed shares and making open market sales of about ₹400 crore between February 4 and February 7 lead to a near-55 per cent drop in the Group’s market capitalisation.
M-cap falls by ₹13,000-cr
Reliance Capital, in a statement, charged that “The illegal, motivated and wholly unjustified action by the above two groups has precipitated a fall of ₹13,000 crore, an unprecedented nearly 55 per cent, in market capitalisation of Reliance Group in just four days, causing substantial losses to 72 lakh institutional and retail shareholders, and harming the interests of all stakeholders.”
Reliance Group, as legally advised, said the purported exercise of rights to enforce the security is illegal and excessive, and against the process and requirements of the respective documentation of the borrowings.
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, the statement said.
The illegalities cited by the Reliance Group include, amongst others, price manipulation, insider trading, front-running and market abuse, and is in violation of various regulatory provisions, including inter alia the SEBI (Prohibition of Fraudulent and Unfair Trade Practices), Regulations, which are applicable to all persons (including NBFCs) dealing in listed securities, whether on invocation of pledge or otherwise.
The Reliance Group (ADAG) said it has issued the statement in ‘public and investor interest’ as Reliance Capital, Reliance Infrastructure and Reliance Power are listed entities.
L&T Fin, Edelweiss deny
L&T Finance refuted and denied the allegations made by the ADAG in their media release on Friday in respect of the sale of pledged shares of the ADAG Group firms.
L&T Finance, in a statement, said it had granted loans against pledge of shares to Reliance ADAG Group companies. “As per loan and pledge agreements, 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,” claimed L&T Finance.
Referring to the media statement released by Reliance ADAG Group, the Edelweiss Group, in a statement, said “it strongly refutes the entirely unfounded, baseless and false allegations of the Reliance ADAG Group”.
The Edelweiss Group said it had granted credit facilities against pledge of shares to the ADAG Group.
“Over the last several months, Edelweiss Group has reached out numerous times to Reliance ADAG Group to address concerns on shortfall in margins (via regular margin call notices) and resultant fall in collateral valuation.
“Despite our best efforts, not only did Reliance ADAG Group fail to address any of the concerns raised by Edelweiss Group, but also continued to breach contractual obligations,” alleged Edelweiss.
The Group said that on February 4, 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. Throughout this process, Edelweiss has acted in a lawful and responsible manner,” claimed the Edelweiss statement.