Shares of the Anil Ambani group companies rallied on Friday, after courtroom victories for Reliance Naval and Engineering and Reliance Communications. Reliance Naval shares closed 15.7 per cent higher over Thursday; Reliance Communications shares climbed 7.1 per cent before closing 2.3 per cent higher.
The Supreme Court (SC) on Friday refused to order a probe into purchase of French fighter jets from Dassault Aviation. A little later in the day, the government told the SC it would approve Reliance Communications’ airwaves sale in two days, a deal that Ambani’s indebted operator badly needs to stave off bankruptcy.
The two developments boosted the market capitalisation of five large listed Ambani firms by $68 million.
This is a relief for investors who have seen huge market capital erosion this year, as the group was dogged by insolvency lawsuits, hurdles to asset sales, and allegations of government nepotism.
Ambani, younger brother to Asia’s richest person, Mukesh Ambani, welcomed the court verdict on the Dassault controversy.
“(This established) the complete falsity of the wild, baseless and politically motivated allegations levelled against the Reliance group and me personally,” he said in an emailed statement.
Some experts believe the share price jump could only be a knee-jerk reaction from the market.
“Favourable Supreme Court judgments have boosted the share price. However, it is irrational the way the stock prices have moved up. I am not very bullish on the prospects of these two companies. I would recommend investors to use the rally to exit their holdings,” said S P Tulisan, founder of investment advisory firm SP Tulsian.com.
Reliance Communications is eyeing an asset-mobilisation plan to bring down its debt burden of Rs 460 billion. The company expects to raise Rs 180 billion from sale of its wireless assets to RJio and real estate assets to Canada’s Brookfield.
Shares of Reliance Communications have more than halved this year on fears of bankruptcy. Market value of six other listed group companies was also down, between 44 per cent and 66 per cent this year. Currently, the total market capitalisation of the seven group companies down to Rs 390 billion from Rs 796 billion.
Currently, the most valuable company of the Anil Ambani group is Reliance Nippon Life Asset Management, a leading mutual fund player. The company, backed by Japan’s Nippon Life, has a market capitalisation of Rs 103 billion.