(Reuters) - A recent plunge in the shares of three companies from India’s Reliance Group was caused by two financial firms selling stock they had held as collateral, the conglomerate said on Friday.
Reliance Group, whose flagship company Reliance Communications is in bankruptcy proceedings, said the sales by L&T Finance Holdings Ltd and certain entities of Edelweiss Group were “illegal and excessive” and were done without any attempt at an “orderly market disposal.”
It added the affected companies - Reliance Capital Ltd, Reliance Infrastructure Ltd and Reliance Power Ltd - were “performing satisfactorily on all operating parameters.”
The three companies said in stock exchange filings that the financial firms had sold around 4 billion rupees ($56 million) of the companies’ shares in the open market from Feb. 4-7.
During that period, Reliance Power’s shares plunged 62.1 percent, while those of Reliance Infrastructure dropped 58.6 percent and Reliance Capital’s fell 38.6 percent.
“Edelweiss Group has reached out numerous times to Reliance ADAG Group to address concerns on shortfall in margins and resultant fall in collateral valuation,” Edelweiss Financial Services Ltd said in a statement.
Since Reliance Group failed to address these concerns, Edelweiss had to liquidate the collateral based on agreed terms, the financial firm said, describing Reliance’s allegations as “unfounded, baseless and false.”
“L&T Finance enforced its rights of invocation and sold pledged shares to the extent of its outstanding dues by following the due process of contract and law,” L&T Finance said in a separate statement, also rejecting Reliance’s allegations.
Reliance Group said that plans by its owner, Anil Ambani, to resolve Reliance Communications’ (RCom) debt problems via the National Company Law Tribunal had no adverse impact on the three group companies in question.
RCom’s stock has dropped 55.2 percent since it announced its plan on Friday.
($1 = 71.1410 Indian rupees)
Reporting by Chris Thomas in Bengaluru; Editing by Muralikumar Anantharaman and Mark Potter