Several non-banking financial companies, including L&T Finance and certain entities of Edelweiss Group, have invoked pledge of listed shares of Anil Ambani-led Reliance group and sold shares worth approximately Rs 400 crore in the open market from February 4 to February 7.
Calling the move an “illegal, motivated and wholly unjustified”, Anil Ambani’s company said the sales have resulted into an erosion of Rs 13,000 crore, an unprecedented nearly 55%, in market capitalisation of Reliance Group over last four days.
Reliance Group said these open market sales, without any attempts at orderly market disposal through a bid or structured process, is illegal on several counts, including amongst others, price manipulation, insider trading, front running and market abuse. The move is also in violation of various regulatory provisions, the press release said.
"Reliance Capital Ltd., Reliance Infrastructure Ltd. and Reliance Power Ltd. (and their various subsidiaries) are performing satisfactorily on all operating parameters, and there is no change whatsoever on any aspect as compared to the position prevailing prior to these sales," the company stated.
Refuting the allegations, L&T Finance 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," it said in a statement.
While noting that the allegations as "unfounded, baseless and false", Edelweiss Group said it had granted credit facilities against pledge of shares to Reliance ADAG Group.
Edelweiss Group said it has reached out numerous times to Reliance ADAG Group to address concerns on shortfall in margins 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," it said in a separate statement.
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 said, adding that it also 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," it added.
First Published: IST