Reliance ADAG, L&T Finance slug it out on pledged shares

Anil Ambani led Reliance Group ADAG has accused L&T Finance and certain entities of Edelweiss Group of misconduct. They have allegedly invoked pledged shares of Reliance Group and sold them in the open market with sales amounting to Rs. 400 crore from 4.2.2019 to 7.2.2019.

L&T Finance 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.

This action has caused the Reliance shares to drop drastically. It has initiated a fall of Rs. 13,000 crore, an unprecedented nearly 55%, in market capitalisation of Reliance Group over just these 4 short days, causing substantial losses to 72 lakh institutional and retail shareholders, and harming the interests of all stakeholders.

Reliance Group felt that the exercise of rights to enforce the security is illegal and excessive, and against the process and requirements of the respective borrowings’ documentation. Since, the above seller entities were regulated by RBI and/or SEBI, they are required to act within the strict parameters of the regulatory framework.

“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, 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.” said Reliance in a press release.

Reliance Capital Ltd., Reliance Infrastructure Ltd. and Reliance Power Ltd. (and their various subsidiaries) are performing well on all operating parameters, and there has been no change whatsoever on any aspect as compared to the position prevailing prior to these sales.

Reliance Communications has also said that it has plans for debt resolution through NCLT (and not liquidation as mistakenly reported by select media), for the reasons stated in its enclosed media releases dated 1.2.2019 and 3.2.2019. There has been no negative impact of this unrelated RCOM proposal on Reliance Capital Ltd., Reliance Infrastructure Ltd. and Reliance Power Ltd.

The above statement is being made in public and investor interest, as Reliance Capital Ltd., Reliance Infrastructure Ltd. and Reliance Power Ltd., and the investment banking companies i.e L&T Finance and Edelweiss Group, are all listed entities.

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