Day after DB Realty chief’s arrest, ADAG scrips tank

Mumbai: Shares of Anil Ambani Group companies were battered by a combination of bad news on Wednesday: the arrest last night of Shahid Usman Balwa, director of Etisalat DB Telecom, and a letter written by the Institute of Chartered Accountants of India (ICAI) to the auditors of Reliance Infra and Reliance Power to ascertain charges levelled by market regulator Sebi against the company in its consent order last month.

The selloff forced Reliance Infrastructure, one of the Group's six listed companies, to plan a buyback of its shares, which it hopes will comfort investors. The company has also moved Sebi "to immediately investigate illegal trades".
The markets opened on a negative note with reports of the government reopening the probe into the alleged cross-holding links between Swan Telecom and Reliance Communications, and the arrest of Balwa, director of Swan, rechristened Etisalat DB Telecom.

In the afternoon, as news of the ICAI letter leaked, there was a massive selloff. ICAI president Amarjit Chopra told The Financial Express, "We have written to the statutory auditors as per disciplinary proceedings we initiate under the Act. After we get a response from the auditors, we will decide the course of action."
The auditors have been given a month to respond, sources said.
Reliance Infra plunged 18.79%, Reliance Communications lost 14.32%, and the Group's six listed stocks saw a combined erosion in market capitalisation of nearly Rs 12,000 crore. Since November 5, 2010, when it touched an all-time high, the Sensex has fallen 16%, while ADAG stocks have shed an average 46%.
In a statement issued immediately after markets closed, ADAG said, "A series of completely baseless and motivated rumours have been spread today by our unscrupulous corporate rivals. This has been accompanied by vicious and illegal bear-hammering of our listed stocks, to create panic and destabilise the markets. We have made a formal complaint to Sebi and the stock exchanges to immediately investigate these illegal trades, and take appropriate action to safeguard the interests of our over 11 million investors."

On January 14, Sebi had barred ADAG chairman Anil Ambani and four top executives of Reliance Infrastructure and Reliance Natural Resources (now merged with Reliance Infrastructure) from investing in listed stocks until the end of the year as part of settlement of an investigation into the alleged use of funds borrowed overseas in the Indian stock markets.
The consent order also prevented Reliance Infrastructure and the erstwhile Reliance Natural Resources from investing in the secondary market until December 2012, though they were free to raise funds by issuing new shares.
Ambani, together with Satish Seth, executive vice-chairman of Reliance Infrastructure, S C Gupta and J P Chalasani, directors, and Lalit Jalan, whole-time director, Reliance Infrastructure, had paid a settlement charge of Rs 50 crore on behalf of the companies "without admitting or denying the charges", according to the order.
Source: Financial Express