The Curious Case of the Angry Ambani
For someone who cut his teeth in the family business as the suave, media face of a large and controversial group, Anil Ambani is an amazingly angry man these days. 
 
He is making enemies of the media, politicians and business partners with rare determination, even as the business empire that he wrested from his brother, Mukesh Ambani, after a horrendous public war, appears to be crumbling. The group has lost 68% in market value—or Rs47,300 crore—in the past 12 months. 
 
Anil Ambani’s role in the Rafale jet purchase deal—which is now as controversial as Bofors—is where he seems to have gone completely ballistic. According to reports, the defamation suits, filed against media houses, journalists and nine Congress Party functionaries, had added up to a phenomenal Rs75,000 crore in the past one year. 
 
Apart from suing those who wrote about his role in the Rafale deal, there are defamation suits filed over the sale of his electricity distribution company to the Gautam Adani group and the sale of telecom assets to Mukesh Ambani which has now fallen through. The demand for damages in each of these cases has ranged from Rs1,000 crore to as much as Rs10,000 crore. The numbers alone are enough to warrant a serious debate on defamation as an exercise to gag the media or suppress negative information. 
 
All this has serious implications for investors, especially those whose money goes into the capital market through mutual funds (MFs) and pension funds. Investors depend on expert fund managers and analysts to be alert, on top of developments and act quickly, to protect their wealth. What if they are prevented from doing their fiduciary duties to act in a fair and free manner? And who decides whether an action to sell shares in the market is negative and malicious at any particular time or proper and in investor interest? 
 
We have two such situations here. Last week, I wrote about the Essel/Zee group where lenders (including MFs that had no business to lend against promoters’ shares) have done a risky deal, ostensibly to protect investor interest. They have jointly agreed to desist from selling shares pledged by Subhash Chandra for a few months, giving him time to raise funds through a strategic investor who could hold as much as 50% of the equity. Since the regulator is silent about the deal, we have no idea whether it will actually proceed as hoped by the, so-called, committee of lenders. 
 
Meanwhile, the failure of the Reserve Bank of India (RBI) to act against the over-leveraged Infrastructure Leasing and Financial Services (IL&FS) for two years and allowing it to create a complex maze of companies and subsidiaries has jeopardised the savings of MF and provident fund investors. Yet, the regulator has not been held accountable and the founding cabal, responsible for inflicting huge losses on investors, appears to be getting away lightly.
 
It is in this context that we need to look at the litigation and notices exchanged between the Anil Ambani group and Edelweiss (specifically ECL Finance Ltd, a debenture-holding company) with whom he had pledged shares of Reliance Power Ltd (RPL). 
 
Edelweiss has been accused hammering the price of Ambani shares by invoking the pledge on them which, allegedly, amounted to dumping shares in the market, instead of trying to get the best prices for them. Did Edelweiss really have a choice? 
 
On 1st February, Reliance Communications (RCom) filed for bankruptcy after its Rs23,000-crore deal with Mukesh Ambani, for sale of telecom equipment, which was seen as a lifeline for the beleaguered group, had fallen through. 
 
Meanwhile, its creditor Ericsson India Limited had filed three insolvency petitions demanding jail time for Anil Ambani for failure to repay its outstandings. On 13th February, the Supreme Court heard and reserved judgement on the issue. Ericsson argued in Court that Mr Ambani had issued a personal guarantee against the borrowing which was independent of his ability to sell RCom shares. 
 
All this was already impacting stock prices of the group and the stage was set for a further decline. So, on 5th February, Edelweiss sold nearly Rs6 crore of RPL’s shares, after issuing the company a notice on 4th February. The Anil Ambani group responded by rushing to the Bombay High Court seeking a reversal in the sale of shares. It also dashed off a letter to the Securities & Exchanges Board of India (SEBI) seeking action against Edelweiss. 
 
In Court, on 13th February, Janak Dwarkadas, counsel for Edelweiss, pointed out that Edelweiss was within its rights to sell shares, after giving a 24-hour notice. He also pointed out that RPL had previously ignored demands to pay an additional interest of 2% on its loans after its share price had plummeted in August 2018. Again, when RCom filed for bankruptcy, it allegedly did not bother to communicate to Edelweiss. The Court refused any interim relief to RPL and will hear the matter today. 
 
Meanwhile, RPL’s letter to SEBI, on 11th February, demanded a ban on Edelweiss from the capital market as being not fit and proper. Its main allegations are largely procedural – essentially that Edelweiss usurped the powers of the debenture trustee and allegedly “flouted documented process and safeguards for enforcement of security.” (See full letter below).
 
 
The letter also argues that Edelweiss ‘hammered’ RPL’s shares and Futures, at its own broking arm, leading to a 57% drop in share price. If Edelweiss has, indeed, done this, which seems unlikely, it would be a foolish move that ought to be investigated and punished by SEBI. However, market participants point out that the mere sale of pledged shares would lead to a precipitous fall when there are no buyers for a beleaguered stock!
 
While RPL accuses Edelweiss of decimating “value for over 31 lakh retail public shareholders” of RPL, Edelweiss says it has "acted responsibly, not only in safeguarding the interests of its investors but also in ensuring that market integrity is maintained."
 
Edelweiss may have given a push to the fall in prices, but the many actions of the Anil Ambani group as well its past record had already combined to decimate the value of its various listed companies. It is another matter that the group does not seem to grasp the enormity of what is going on and is busy filing a public offer for its general insurance company. 
 
Let’s try and understand why this concerns investors in general. 
 
For starters, India has followed the world in adopting disclosure-based regulation which puts the onus on investors to read public disclosures and act on them sensibly. What happens when companies fail to make proper disclosures or attempt to gag those who are most likely to put this information in the public domain, namely, media and analysts? 
 
Secondly, what happens if companies use their financial and political clout over government and regulators to try and browbeat investors/MFs from selling these shares at, what they consider, the best time to optimise gains or reduce losses? 
 
If this were to happen, the entire edifice of disclosure-based investment would break down – and we are already seeing this happen repeatedly. The National Stock Exchange’s (NSE’s) attempt to gag Moneylife by slapping a Rs100-crore defamation suit was a similar display of financial muscle to stop the various irregularities from coming to light. It, subsequently, led to a complete clean-up of top management and the investigation continues.
 
Thirdly, Edelweiss’s actions in selling shares to protect itself were straightforward. It was nowhere as unorthodox as the lenders forming a committee to protect the price of Zee group shares. If SEBI is silent about that move, ostensibly to protect ‘investor interest’, it cannot possibly fault a rapid sale by Edelweiss to salvage whatever value it can from the RPL shares in the event of a bigger crash. Who is to decide whether its actions precipitated a crash or was it merely the first out of the gate?
 
Since the market regulator has abdicated its responsibility by remaining silent, the courts may have to decide this highly complex and sensitive issue. Isn’t that completely at odds with the idea of independent regulators with domain expertise? But, like many other aspects of India’s business and economy, we will have to muddle through the situation to find solutions.
 
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COMMENTS

Sudhakar Ojha

4 weeks ago

Another reason why defamation Law should be scrapped. The least that can be done in the immediate term is to exempt analysts and fund managers and press from such prosecution.

Amit Upadhye

1 month ago

Great efforts from Moneylife team on putting up a fight with the mighty lobbyist whose interest is to fool the investors. kudos again for your efforts.

Shashikala

1 month ago


If customer has been passed away what documents have to upload for the nominees .

REPLY

K V RAO

In Reply to Shashikala 1 month ago

Nominees have to just furnish death certificate. Nominees can claim deposits but they hold them in trust.

Amit Jain

1 month ago

Anil Ambani's role in Rafale puchase is controversial??????????????????? As controversial as Bofors?????????????

K V RAO

1 month ago

It is fashionable to blame AA as he has fallen from the grace due to his own mishandling the empire on hand. A bit of history how the two brothers commenced their journey after the demise of Dhirubhai Ambani is in order. Their mother entrusted the task of dividing the moolah to K V Kamath who was a close family friend of Dhirubhai Ambani. KVK did a good job of distribution of business and allocation of assets and wealth. In fact he obliged AA at the request of AA's mother to allot Reliance Communications (RC)to AA. AA was bent upon getting it as he foresaw bright prospects to telecommunication business. Rest his history. But what went wrong with AA and how MA sustained the businesses acquired by him with meticulous concentration? MA's late entry to telecom sector (read Jio) disrupted Airtel, Idea, and other big wigs. AA's strategy of unrelated diversifications led to thin spread of capital and he lost focus in midway. Further his flamboyant style and relationship with certain political friends diverted his valuable time and energy. Whereas MA's calculated approach and smart moves resulted in huge value additions. No doubt MA helped his brother in taking over certain telecom assets to relieve the debt burden. But piled up debts of AA have made all his businesses non-viable due to overreach of interest coverage from earnings. His financial fortunes will further deteriorate with no prospects of returning home.

REPLY

AAR

In Reply to K V RAO 1 month ago

Split was never equal. MA got the cash cow petroleum. AA got the new and future unknown sectors. Difference is showing up now.

K V RAO

In Reply to AAR 1 month ago

How can we assume petroleum is a cash cow when margins are very less in that business?

Further if we go through the history of that time, it is clear AA was keen on getting the telecom sector and so he persuaded his mother to make K V Kamath agree to allot Reliance Communications (RC) to him. AA perceived RC with certain amount of flamboyance and prestige. Even MA was keen on getting it. There was no way that petroleum and telecom business could have been allocated to single Ambani. KVK obliged the mother and so AA walked out happily with RC after the partition. Partition was a zero time and both perceived and accepted their share professionally and without at least outward expressions of any disappointment. Rest is however history. Difference is showing up only due to mishandling of portfolios by AA and meticulous approach of MA to his businesses. I however do not hold any brief to MA/AA but used to followup the developments out of sheer curiosity. There are lot more points but a brief rejoinder is adequate for all the viewpoints expressed herein.

I request AA to go through the readings of that time which will surely set right all doubts.

To conclude, two case studies can be excellent learnings in business strategies and their outcome.

AAR

In Reply to K V RAO 4 weeks ago

Petroleum is not cash cow? RIL generates Rs5000+ crores profits every quarter.

K V RAO

In Reply to AAR 4 weeks ago

I don't know about petroleum business cash profit. This much I can say. In petroleum, margins are very low. It's volume business. With 3% margins it has to take care all expenses

SURAJIT SOM

In Reply to AAR 1 month ago

Cash cow-that is the difference between MA and AA. Jio has become -lets admit it-a phenomenon. Now lets look at Reliance Power. Its IPO debut was a dream in a country where most people do not have power. In other words , unlimited demand . Sky was the limit. Now you look at RP. That is the difference between MA and AA. One CREATES cash cow, the other destroys it !!!!

Akshay Rajput

1 month ago

यही अपराध में हर बार करता हु..
"अंबानी" नाम से ,लोगो के पैसों से नई कंपनी स्टार्ट करता हु

Whatsapp Mania

1 month ago

Both Ambanis are chors..we are already seeing Govt bending over E-commerce regulations: 1) restriction on sellers 2) data draft policy 3) exclusive deals etc etc
For the older Ambani

REPLY

K V RAO

In Reply to Whatsapp Mania 1 month ago

Sir please do not use "Chor" such a strong word. You have every right to express your viewpoints and there is a merit in every argument and counter argument. In fact you have covered certain points which none has used them. Issue becomes very complicated when many professionals come together and put forward their viewpoints.

To conclude,just a joke, shall we agree to disagree?

SURAJIT SOM

In Reply to Whatsapp Mania 1 month ago

It is thoroughly unfair to compare MA and AA. Billionaires are not angel . Nobody is including me or you. But people like them can contribute a lot ( like Ford made to America). MA's Jio has revolutionised India's digital world. Now a poor labourer watches movie on a mobile !!! Do you know or remember what was the situation when Sarkar used to monopolise telephone services ? Infosys had to wait for two years to get a Sarkari telephone !!!!

Ramesh Poapt

1 month ago

anil is unlucky....not fraud...i wish he will come stronger in future.

REPLY

K V RAO

In Reply to Ramesh Poapt 1 month ago

Definitely AA has not committed any fraud. But to bring luck factor in business events is little out of place discussion. Are we all groping in dark seeking reasons for failed strategies? Unrelated diversifications, lack of promoters interest, too many eggs on hand, etc have been responsible for the fall of AA's business empire. Even the well managed Airtel and Idea have suffered in telecom business due to disruption mounted by MA. When that is the situation, the flagship company (read Reliance Communications)is bound to face huge problems. When the management is not capable of handling related issues, it becomes a hopeless business situation.

Akshay Rajput

In Reply to Ramesh Poapt 1 month ago

It's his luck which make him use Dhiru bhai Ambani's Name

Ravinder Makhaik

1 month ago

I find it very amusing to try and stop an investor (be it an investment/mutual fund group) from selling shares / pledged shares when there is a very plausible case of incurring a greater loss if not acted upon the available information at a given time.

With the kind of controversy the Anil Ambani Group has generated around itself, the risks have only mounted and a fire sale is a sensible 'merely the first out of the gate' policy.

SURAJIT SOM

1 month ago

AA is " justified" for being furious. Because Edelwiess was following rule but AA never believed in dong that. He was once fined by SEBI . Right ? Reliance Power made record when its subscription for IPO opened in 2008. Within minutes it was oversubscribed !!!! Probably a world record. The finance minister of India was euphoric. After that ? Crores of investors lost money (including me ). And now it is hitting one low after another. What an irony !!!!

REPLY

Akshay Rajput

In Reply to SURAJIT SOM 1 month ago

यही अपराध में हर बार करता हु..
"अंबानी" नाम से ,लोगो के पैसों से नई कंपनी स्टार्ट करता हु

Gurudutt Mundkur

1 month ago

He has himself to blame. Inability to accept facts that he was outwitted by a his smarter elder brother has led to this state of his financial crises. May be there are more, which I do not know about and the media is silent for reasons of propriety.

SuchindranathAiyerS

1 month ago

India's efforts to dumb down India since 1947 by corroding education, merit and integrity with reservations and extortion fomenting laws is yielding results everywhere.

REPLY

AAR

In Reply to SuchindranathAiyerS 1 month ago

Capital Markets, Banks, Accountants and Auditors are monopolized by Brahmins and Gujjus. When everything is good, they pocket the bonus and take credit. When their greediness and lack of integrity causes the failure, they simply blame reservations. Shameful.

K V RAO

In Reply to AAR 1 month ago

Why please bring casteism? Let us have a professional approach. Our reader friend AAR is quite capable of mooting professional viewpoints on a business topic like this.

AAR

In Reply to K V RAO 4 weeks ago

I was replying to a casteist comment.

SURAJIT SOM

In Reply to AAR 4 weeks ago

The problem is caste is omnipotent in India. It is the elephant in the room. We can "eradicate" it, yes. On paper only !!! Look at reservation. Remember even Christian, Sikhs , Muslims discreetly practice casteism in India. In many parts of India( need i take names ? ) it dominates so many aspects of everyday life and politics. Our NETAS happily fish in "castetist" water.

sachin Ghatge

1 month ago

very good & informative coverage

SEBI eases norms for non-residents to transfer shares to kin
Capital markets regulator SEBI on Monday granted relaxation to non-residents from furnishing PAN card details to transfer equity shares to their immediate relatives subject to conditions.
 
According to the SEBI, many non-residents such as Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), Persons of Indian Origin (PIOs) and foreign nationals have been facing difficulties in transferring shares held by them since many of them do not have PAN card.
 
"In order to address the difficulties faced by such investors, it has been decided to grant relaxation to non-residents (such as NRIs, PIOs, OCIs and foreign nationals) from the requirement to furnish PAN and permit them to transfer equity shares held by them in listed entities to their immediate relatives...," the SEBI said in a circular.
 
Accordingly, the relaxation shall only be available for transfers executed after January 1, 2016. 
 
"The relaxation shall only be available to non-commercial transactions, i.e. transfer by way of gift among immediate relatives," the circular said.
 
"The non-resident shall provide copy of an alternate valid document to ascertain identity as well as the non-resident status."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

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SEBI proposes to fix circuit filters on F&O scrips
Mumbai, Capital markets regulator Sebi on Monday proposed to fix circuit filters or price bands on futures & options (F&O) scrips to curb excessive volatility.
 
In a discussion paper on "Applicability of Individual Scrip wise Price Bands or Circuit Filters" on F&O scrips, Sebi said: "Concerns have been raised that investors' wealth is getting wiped out in a single day by recent falls in stocks on which derivative products are available, as no price bands or circuit filters are applicable on them."
 
"In view of recent abnormal intra-day price movements, suggestions are being made to review the rules to prevent such extraordinary price movements."
 
Derivatives markets reflect expectation of spot prices in the future, and as such price bands or circuit filters are generally not applied on them.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

V ganesan

1 month ago

Ban futures and options in individual scrips.Allow only index options. Instead of discouraging f and o NSE introduced weekly f and o.It is a real casino.

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