Lenders are pushing the promoter entities of Anil Ambani-led Reliance Group to increase the collateral to cover Rs 6,000-crore debt even as the younger Ambani sibling appeared in court for the second successive day on Wednesday to face a contempt charge.
Ambani is in court facing a contempt petition that Swedish telecom equipment maker Ericsson filed after Reliance Communications (RCom) defaulted on an instalment of payment for equipment delivered. RCom has initiated bankruptcy proceedings after the default. The proceedings with the National Company Law Tribunal (NCLT) triggered a landslide of erosion in the value of shares held as security by the lenders to the different Reliance Group companies.
The creditors started raising margin calls in October last year when the Reliance Power stock began showing signs of weakness, according to a media report. Since the announcement of the move to invoke the bankruptcy code, the shares of many Reliance Group companies have nosedived. Since February 4, RCom plunged 54 per cent, Reliance Power 59 per cent, Reliance Capital 32 per cent and Reliance Infra 56 per cent, according to media reports.
Anil Ambani alleged last week that the sale of shares by two of the group's 11 lenders was illegal. The sales of the pledged Reliance Power shares by financial services companies L&T and Edelweiss triggered a domino effect, according to Ambani. Apart from L&T Finance and Edelweiss, STCI Finance also sold off Reliance Group shares to recover part of their loans to the group. L&T and Edelweiss defended the sale of pledged shares saying they were legally right to recover their debt because of the sharp erosion of the security holding's value.
Anil Ambani has approached the securities trade watchdog Securities and Exchange Board of India (Sebi) for a ban on the lenders who sold shares of Reliance Group entities. The Reliance Group has sought action against various Edelweiss group entities including Edelweiss Commodities Services, ECL Finance, Edelweiss Special Opportunities Fund, and Edelweiss Credit Opportunities Fund for selling the pledged shares of the group companies and also selling in futures segment, according to a report.
The default threat of RCom was on the air for some time after its stalled attempt to sell broadband spectrum to elder Ambani-led Reliance Jio, which entered telecom business in 2014 and, perhaps, contributed to the downfall of RCom. Though the Telecommunication Regulatory Authority of India (Trai) and the Supreme Court approved the sale, Jio's insistence on clarity about RCom's dues to the Department of Telecom (DoT) has been the principal impediment.
"There was a meeting on February 6 between lenders and Reliance Group officials about an additional cover. The group promised additional cover and we are still awaiting a response from them," an executive of a lender told Business Standard website.
"The margin call notices have gone in accordance with the agreements signed by the company. We would certainly like to know where the money was invested by these group entities," said the executive.