The Bombay High Court (HC) on Wednesday declined interim relief to the Anil Ambani group’s promoter entities, which had moved a petition asking the court to restrain Edelweiss Financial Services from selling its pledged shares. The court has, however, admitted the petition.
Anil Ambani promoter entities — Reliance Wind Turbine Installations Industries and Reliance Project Ventures and Management — sought damages of Rs 2,700 crore from Edelweiss for selling its shares “illegally”.
On February 8, 2019, the group said L&T Finance and certain entities of Edelweiss Group, invoked pledge of listed shares of Reliance Group and made open-market sales of the value of approximately Rs 400 crore in early February.
The group had said the “illegal, motivated and wholly unjustified action” by the two groups has precipitated a fall of Rs 13,000 crore, an unprecedented 55 per cent, in market capitalisation of the Reliance Group over four days, causing substantial losses to its shareholders.
The petition filed in the Bombay High Court is only against Edelweiss.
The Reliance Group had said the exercise of rights to enforce the security is illegal and excessive, and against the process and requirements of the respective borrowings’ documentation.
“The manner of conduct of the above open-market sales, without any attempts whatsoever at orderly market disposal through a bid or structured process for shares comprising the holding of the promoter group, is also illegal on several counts, including amongst others, price manipulation, insider trading, front running, and market abuse, and is in violation of various regulatory provisions,” it had said.
The group had also asked market regulator Securities and Exchange Board of India to take action against Edelweiss.
According to sources, Edelweiss, in its representation before the court, said it had tried reaching out to the Reliance Group several times to address concerns on shortfall in margins and resultant fall in collateral valuation, but did not receive adequate responses.
Edelweiss shares on Wednesday fell 3.5 per cent to Rs 127 a share.
Lenders, including private banks and mutual funds, have asked Anil Ambani-controlled Reliance Group’s promoter entities to put more collateral on the table to secure their Rs 6,000-crore exposure. The margin calls first started in October last year when the Reliance Power stock began showing signs of weakness, according to a lender.
Among mutual funds (MFs), Franklin Templeton, DHFL Pramerica and Indiabulls have taken debt exposure to the group companies by investing in debt papers of group companies against promoters’ shares as collateral. According to sources, the fund houses continue to engage with the group even as they have used the cash top-up available to reduce their exposures.