Sebi consent order hits Anil Ambani group shares

The shares of Anil Ambani group companies fell by four to eight per cent on Monday as investors reacted to the regulator’s consent order settling a probe into alleged violations of foreign investment and unfair trade rules by group companies Reliance Infrastructure (R-Infra) and Reliance Natural Resources Ltd (RNRL).

R-Infra shares fell 7.8 per cent to Rs 735.70 on the Bombay Stock Exchange. Reliance Power (down 6.1 per cent to Rs 137.90), Reliance Capital (down 6.45 per cent to Rs 573.80), Reliance Communications (down 4.8 per cent to Rs 131.80) and Reliance Mediaworks (down 8.45 per cent to Rs 182.05) were also under heavy selling pressure. The Sensex gained 0.12 per cent to close at 18,882.25.

The combined market capitalisation of group companies fell by Rs 6,647 crore to Rs 1,01,073 crore, according to BS Research Bureau.

The Securities and Exchange Board of India (Sebi) said after Friday market hours that R-Infra and RNRL “shall not make investment in listed securities in the secondary markets (other than mutual funds) until December 2012.” RNRL was merged with Reliance Power last year.

Anil Ambani, chairman of the group, along with R-Infra CEO & Whole-Time Director Lalit Jalan, Director (Operations) S C Gupta, Vice-Chairman Satish Seth and Reliance Power CEO J P Chalasani were put under similar restrictions until December 2011. The order includes payment of Rs 50 crore as settlement charges, which have been paid by the directors without any financial burden on the companies involved.

The regulator has, however, allowed the entities to subscribe to primary issues, buybacks and open offers.

“The Sebi order has dented investor confidence in group companies. There has to be a reason why they have agreed to these types of consent terms,” said the head of a broking firm, on condition of anonymity. “In the short term, the damage to the shares has been done.”

In a press conference yesterday, Ambani had said the consent order would not impact financial and growth prospects of the group. He added the company had put in place checks and balances to avoid such instances in the future.

“Though there will not be any financial impact on these companies, the perception after the Sebi order is negative,” said a Mumbai-based broker. “The market reaction reflects these concerns.”

To allay investor concerns, Ambani had said the consent order had been a “learning process” based on which internal systems had been strengthened.