The trading ‘ban’ on Anil Ambani’s companies

Anil Ambani has said that his participation in the marathon shows his drive and focus are strong

Anil Ambani has said that his participation in the marathon shows his drive and focus are strong

Late last week, news broke that the Securities and Exchange Board of India (Sebi), the market regulator, had banned two Anil Ambani companies from investing in secondary markets until December 2012. Reliance Infrastructure and Reliance Natural Resources Ltd (RNRL) were barred for ‘unfair market dealings’. Additionally, Ambani and four directors were prohibited from investing in listed companies till December 2011. However, they will be able to invest in open offers, buybacks and primary issues.

Sebi began its investigation into the two companies in 2010. It says it found both companies had misrepresented the nature of their investments ‘and the profits and losses thereof’, which had been published in their annual reports for 2007, 2008 and 2009.

While the proceedings were in progress, there occurred an interesting development. On 9 September  2010, Sebi received a letter from the companies that suggested the matter be settled. A high-powered action committee put forth terms which were accepted by Sebi in January: the companies would not be allowed to invest in the secondary market for a while, and neither would their directors. Above all this, the directors would front the fine for each company: Rs 25 crore. Without accepting or denying the charges, the companies’ directors paid up the full amount on 10 January.

Sebi went public with the news on 14 January. Two days later, after the Mumbai Marathon, Ambani made it clear that the terms of consent were self-imposed. He also said that his participation in the marathon showed that his drive and focus were strong.

On 17 January, the stock of Reliance Power, which had merged with RNRL, fell by 9.35 per cent, while Reliance Infrastructure dipped by 8 per cent. Reliance Capital and RComm stocks also dropped by over 4 per cent.

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arindam