R-Pow­er­wantsSebi to ban Edel­weiss from stock mar­kets


Reliance Power has asked the Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) to pro­hibit the Mum­bai-based Edel­weiss group from trad­ing in the se­cu­ri­ties mar­ket.

The strongly worded let­ter is dated Fe­bru­ary 6. It asks the reg­u­la­tor to is­sue a “cease and de­sist” in­struc­tion from en­gag­ing in “mar­ket abuse”, which al­legedly led to its share price plung­ing 57 per cent in two days.

It asks Sebi to in­ves­ti­gate this dis­rup­tion of Reliance group (Anil Ambani’s) shares, “which in­clude ex­am­i­na­tion of the deal­ing room records, in­clud­ing records of phone calls and SMS of all per­sons at the broking firms where the bulk of the sale trans­ac­tions took place, and the rel­e­vant fund flows”.

Shares of the Anil Ambani group com­pa­nies fell af­ter news that it had de­ferred a re­struc­tur­ing plan, which in­cluded sell­ing its tele­com arm, RCom, af­ter there was no con­sen­sus on a deal be­tween the var­i­ous banks in the com­mit­tee of cred­i­tors.

The let­ter al­leges Edel­weiss “had pressed huge sale or­ders sig­nif­i­cantly be­low the pre­vail­ing mar­ket price, thus ma­jorly con­tribut­ing to down­ward move­ment in the last traded price”. Such sell­ing was “en­forced not only in the cash but also in the de­riv­a­tives seg­ment in a dis­or­derly man­ner”. Lead­ing to de­lib­er­ate “ham­mer­ing down of the price of Reliance Power shares”.

R-Power has 3.1 mil­lion share­hold­ers and debt of over ~30,000 crore. The pro­mot­ers had raised the loans by pledg­ing their share­hold­ing in the com­pany, one of which was is­sued to the Edel­weiss group.

The share sell-off was pri­mar­ily by Edel­weiss and L&T Fi­nance of pledged shares. The two lenders have de­nied any wrong­do­ing and plan to ap­proach Sebi to clar­ify their po­si­tion.

In its let­ter, R-Power says there was no more than “mar­gin short­fall and breach of some loan covenants”. How­ever, the en­ti­ties of Edel­weiss “re­sorted to en­force the pledge on Reliance Power shares and dumped the same in the mar­ket”.

A Reliance group spokesper­son, when asked about the let­ter, said: “As re­solved by the boards of var­i­ous group com­pa­nies, we will take all le­gal steps nec­es­sary to pro­tect and en­hance the value of our stake­hold­ers, in­clud­ing pur­su­ing it with ap­pro­pri­ate reg­u­la­tors.”

Draw­ing com­par­isons with sim­i­lar sales of pledged shares by lenders, the let­ter says “there has been sim­i­lar dis­rup­tion and ir­re­spon­si­ble con­duct in re­spect to other cor­po­rate houses, in­clud­ing the Es­sel group, Su­zlon group, IRB In­fra­struc­ture, etc”.

The let­ter also gives some le­gal anal­y­sis to bol­ster its view. It con­tends that “un­fair trade prac­tices are not sub­ject to a sin­gle def­i­ni­tion; rather, it re­quires ad­ju­di­ca­tion on a case by case ba­sis”.

Also, “broadly, trade prac­tice is un­fair if the con­duct un­der­mines eth­i­cal stan­dards and good faith be­tween par­ties en­gaged in busi­ness trans­ac­tions”.

R-Power has 3.1 mn share­hold­ers and a debt of over ~30k crore. The pro­mot­ers had raised the loans by pledg­ing their share­hold­ing in the firm, one of which was is­sued to Edel­weiss

Anil Ambani com­pany al­leges ‘mar­ket abuse’, in se­quel to its shares getting ham­mered in stock mar­kets

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