Anil Ambani’s group said Indian federal investigators examined some of its officials, hours after reporting it knows the brokers who spread “sensational charges” that caused a $2.6 billion loss in value Feb. 9.
The Central Bureau of Investigation “is reportedly examining a large number of telecom companies and their officials over the past several weeks, in relation to various matters relating to the years 2001 to 2008,” Reliance ADA Group said in an e-mailed statement today, without elaborating. “As part of this process, CBI has also examined a few officials of Reliance ADA Group.”
The group, which has power, mobile-phone and infrastructure businesses, said yesterday brokers sent e-mails, text messages and made telephone calls disseminating “baseless” accusations about its firms and sought an investigation by India’s capital- markets regulator. The group’s flagship, Reliance Communications Ltd., plunged 15 percent this week, as analysts predicted the company will post a sixth straight drop in profit on Monday.
“Earnings are immaterial now,” said Jigar Shah, an analyst with Kim Eng Securities India Pvt. in Mumbai who has a “sell” rating on the shares. “What is critical is how they are able to reduce debt levels.”
Reliance Communications fell as much as 7.1 percent yesterday to 89.70 rupees, the lowest level since trading began March 7, 2006, as investors are concerned lower profit will constrain the ability of India’s most indebted mobile-phone operator to cut loans. It rose 0.6 percent at close of trading.
The mobile-phone company is the worst-performing stock in India’s benchmark index this year. Billionaire Ambani’s Reliance Infrastructure Ltd. is the second-worst.
The Bombay Stock Exchange Sensitive Index is the world’s worst-performing benchmark gauge apart from Egypt this year. The Sensex rose 1.5 percent yesterday.
Indian investigators are probing telecommunication companies after a government panel said Feb. 4 that the Department of Telecommunications failed to follow guidelines while allocating mobile-phone airwaves. The Comptroller & Auditor General of India said in November airwaves were sold for an “unbelievably low” $2.7 billion.
Reliance Communications’ net income may fall 66 percent to 3.7 billion rupees ($81 million) in the third quarter, according to the average of 25 analyst estimates compiled by Bloomberg. The company reports Feb. 14.
The company’s net debt increased more than eight-fold to about 292 billion rupees as of Sept. 30 from 33.7 billion rupees at the end of September 2007, according to its quarterly reports. The operator will cut investment in capacity expansion as it aims to become debt free in three years, Ambani said last year.
Ambani’s companies plunged Feb. 9, after which the group said “vicious and illegal” rumors sparked a sell-off.
The company, India’s second-biggest mobile-phone operator, was in talks to sell a stake or do an initial public offering of its mobile-phone tower unit after negotiations to sell it to GTL Infrastructure Ltd. collapsed Aug. 31.
The board also approved a separate plan to sell a 26 percent stake in itself at an “appropriate” premium to the market price, to a strategic buyer or a private equity firm, the company said in an e-mailed statement June 6.
“There have been so many attempts by the company to dilute equity and raise some capital, but nothing has materialized,” said Yogesh Kirve, an analyst at Anand Rathi Financial Services Ltd. in Mumbai. He has a “sell” rating on the shares.
Reliance Communications is trying to reduce debt after it and rivals Bharti Airtel Ltd. and Vodafone Essar Ltd. spent a combined $15 billion buying third-generation wireless spectrum in India, where call rates are as cheap as a half-penny a minute.
Reliance’s average revenue per user, a key measure of performance in the mobile-phone industry, dropped 38 percent in the second quarter.
Call rates have plunged in India since 2009 as new entrants including Japan’s NTT DoCoMo Inc. and Norway’s Telenor ASA triggered a tariff war. More than a dozen operators are competing in India, which had 730 million mobile-phone accounts as of November, making it the world’s biggest market after China.
Nineteen of the 44 analysts tracked by Bloomberg recommend selling Reliance Communications, 14 recommend holding and 11 recommend buying.
Ambani blamed rumors for the Feb. 9 plunges in shares of his group’s telecoms, power and infrastructure companies.
“A series of completely baseless and motivated rumors have been spread by our unscrupulous corporate rivals,” Reliance ADA Group said then. “This has been accompanied by vicious and illegal bear hammering of our listed stocks, to create panic and destabilize the markets.”
Ambani’s wealth has diminished along with the drop in the group’s market value, according to estimates by Forbes magazine. In 2010, his net worth was less than half of his older brother Mukesh, who ForbesAsia said was worth $27 billion. Anil Ambani’s worth was estimated to be $13.3 billion.
The decline started in 2008, when Anil Ambani’s net worth fell by $32 billion, the magazine estimated in its annual listing of the world’s wealthiest.
To contact the reporters on this story: Ketaki Gokhale in Mumbai at firstname.lastname@example.org; Rakteem Katakey in New Delhi at email@example.com; Madelene Pearson in Mumbai at firstname.lastname@example.org