Reliance Group boards recommend legal action over m-cap erosion
A day after accusing L&T and Edelweiss entities of causing huge market value erosion by “illegal and motivated” sale of their pledged shares, Anil Ambani-led Reliance Group said boards of its three listed firms had recommended “all appropriate legal steps” to protect shareholders’ value.
In separate regulatory filings, Reliance Capital, Reliance Infrastructure, and Reliance Power said their respective boards met on Saturday to review the events of last week that led to a sharp fall in their market capitalisation and destruction of wealth.
L&T Finance and Edelweiss Group have refuted the allegations and counter accused Reliance Group of failing to make timely payments, which they said necessitated sale of pledged shares.
In its filing, Reliance Capital said its over 700,000 shareholders had been impacted by “illegal, motivated and unwarranted actions of L&T Finance”. The financial services arm of Reliance Group said its board had recommended and approved that the company take all appropriate legal steps to protect and enhance the value of all its stakeholders, especially retail shareholders.
Reliance Power separately said its board reviewed the events leading to a sharp fall in market capitalisation and destruction of wealth due to “illegal, motivated and unwarranted actions of L&T Finance and Edelweiss Group, impacting its over 31.75 lakh shareholders”. Its board also recommended and approved “all appropriate legal steps to protect and enhance the value of all its stakeholders”.
Reliance Infrastructure blamed L&T Finance for market value erosion, saying it had impacted its over 800,000 shareholders and said its board had, therefore, recommended and approved all appropriate legal steps.
In its statement on Friday, Reliance Group had alleged that some NBFCs, “substantially L&T Finance and certain entities of Edelweiss Group, have invoked pledge of listed shares of Reliance Group and made open market sales of the value of approximately ~400 crore during February 4-7”. “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 over just these four short days,” it had said.
Refuting the allegations, L&T Finance said it had granted loans against pledge of shares to Reliance ADAG Group companies. “According to the loan and pledge agreements, the 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.
Anil Ambani-promoted firms have blamed L&T Finance, Edelweiss for a sudden slump in their stock prices