Anil Ambani group shares hammered due to alleged involvement of top executives in 2G scandal
Moneylife Digital Team 09 February 2011

According to the rumours in the market, the promoter of Swan Telecom, which is alleged to have a hand in the 2G scam, is believed to be close to Anil Ambani. An ADAG spokesperson, however, has denied that the company is involved

The stock prices of various listed companies of the Anil Dhirubhai Ambani Group (ADAG) companies fell by more than 10%-20% today, following rumours that executives of the group would be questioned-or even arrested-as part of the the government crackdown on the investigation of the 2G scam, where former union telecom minister A Raja along with his two executives were also arrested.

By the end of the day, all the stocks of the Anil Ambani group companies crashed. Among the worst hit was Reliance Infrastructure, which fell by more than 15%. It fell by 18.79% to Rs534.70 on the Bombay Stock Exchange (BSE).

Reliance MediaWorks was down by 16.11% to Rs129.90, Reliance Communications (RCom) Ltd collapsed by 14.32% and Reliance Capital by 14.05% at Rs412.90.

Reliance Power Ltd was down by 8.93% to around Rs113.15 on the stock exchange. Meanwhile, the benchmark index Sensex fell by 182.93 points.

The arrest of the managing director of DB Realty Shahid Usman Balwa was in connection with the 2G spectrum allocation, where Mr Balwa was allegedly channelling bribes paid to the former telecom minister to secure 2G spectrum.

He is also said to have helped Mr Raja park the money in the real estate business. Central Bureau of Investigation (CBI) sources say they have evidence from the Income-Tax Department in this regard.

DB Realty floated Swan Telecom, which allegedly was helped by Mr Raja to get 2G licences in 13 circles-including Mumbai and Delhi-for Rs1,537 crore. Within months of getting the spectrum, Swan sold 45% of its shares to UAE telecom giant Etisalat for about Rs4,500 crore.

DB Realty has a debt of Rs4 billion on its books, that includes a Rs1.9 billion loan, again from LIC Housing Finance. The company has said that it does not have any direct or indirect shareholding in Etisalat DB Telecom (originally Swan Telecom) and that promoters of DB own around 45% in Etisalat DB.

According to the rumours in the market, the promoter of Swan Telecom is believed to be close to Anil Ambani. This took a heavy toll on the stock prices of ADAG companies.

Reliance Communications is being probed in the 2G scam, along with Unitech, Tata Teleservices, Shyam Telelink (now Sistema Shyam Teleservices) and Swan Telecom (now Etisalat DB Telecom), which have sold stakes in their wireless ventures at significant premiums after they were allocated spectrum. RCom had issued a clarification, saying it owned a 10% stake in Swan Telecom until December 2007 but that it didn't hold a stake in Swan when the license was granted in 2008.

Last week, the CBI accused Swan, which has since been renamed Etisalat DB, and Unitech of buying mobile licences at unfairly cheap prices. Unitech's joint venture Unitech Wireless is majority held by Norway's Telenor.

According to a release late evening from a Reliance ADAG spokesperson, "A series of completely baseless and motivated rumours have been spread today by our unscrupulous corporate rivals. This has been accompanied by vicious and illegal bear hammering of our listed stocks, to create panic and destabilise the markets. We have made a formal complaint to SEBI and the stock exchanges to immediately investigate these illegal trades, and take appropriate action to safeguard the interests of our over 11 million investors."

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