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Anil Ambani’s Group Says ‘Illegal Trading’ Sparked Share Plunge

Billionaire Anil Ambani
Billionaire Anil Ambani. Photographer: Qilai Shen/Bloomberg

Billionaire Anil Ambani’s group asked India’s stock exchange and regulator to investigate “illegal trading” after shares in its telecoms, power and infrastructure companies plunged the most in more than a year.

Reliance Infrastructure Ltd., the builder of a mass rapid transit system in Mumbai, declined 19 percent, the biggest drop in more than two years, and Reliance Communications Ltd., India’s second-largest mobile-phone operator, dropped 14.3 percent, the steepest fall in 13 months. Reliance Power Ltd. sank 9.6 percent.

“A series of completely baseless and motivated rumors have been spread today by our unscrupulous corporate rivals,” Reliance ADAG group said in an e-mailed statement. “This has been accompanied by vicious and illegal bear hammering of our listed stocks, to create panic and destabilize the markets.”

The sell-off wiped $2.6 billion off the group’s market value and dragged down the benchmark Sensitive Index, already the worst performer in the world after Egypt. Anil Ambani, 51, last month agreed to stay away from trading in shares in the secondary market this year after an investigation by the markets regulator into breaches of overseas borrowing rules.

“The governance and corporate governance deficit are a big concern for investors,” said Jagannadham Thunuguntla, a New Delhi-based chief strategist at SMC Global Securities Ltd. “Investor sentiment has been hit as some high-profile corporate groups are under the scanner. In a weak sentiment market even a rumor can be a bad news.”

N. Hariharan, spokesman for the market regulator, didn’t answer three calls made to his mobile phone. Divya Malik Lahiri, a spokeswoman for the National Stock Exchange, couldn’t immediately comment when contacted on her cellphone.

Telecoms Arrest

India’s federal investigators last night arrested the top executive of a rival mobile-phone company as part of a widening probe into wireless licenses and NDTV Profit television reported an accounting body had sought information from Reliance Power and Reliance Infrastructure.

Reliance Infrastructure fell 127.4 rupees to 531.7 rupees at the 3:30 p.m. close in Mumbai. Reliance Power sank 9.6 percent to 112.2 rupees. Reliance Capital Ltd. slid 14 percent to 412.15 rupees and Reliance Communications Ltd. dropped 14 percent 94.65 rupees, a record low. Five Anil Ambani group companies lost 14 percent of their value to 760 billion rupees ($16.7 billion).

“There is a sense of fear among investors that there could be some serious corporate governance issues,” said Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities Pvt.

Boost Charge

India’s telecommunications regulator today recommended the government increase the charges for second-generation mobile-phone airwaves sixfold amid a widening probe into the sale of spectrum in 2008.

The Telecom Regulatory Authority of India said the government should charge 109.7 billion rupees ($2.4 billion) for any company to use an initial 6.2 megahertz of spectrum capacity, it said on its website today. Ten years ago, the entry fee for nationwide mobile airwaves cost 16.62 billion rupees.

Etisalat DB Telecom

The Central Bureau of Investigation arrested Shahid Balwa, vice chairman of Etisalat DB Telecom India Pvt. yesterday, the agency’s spokeswoman, Binita Thakur, said in a phone interview today. His arrest comes a week after authorities detained former telecommunications Minister Andimuthu Raja for questioning over the awarding of mobile-phone licenses.

Balwa, who is also the managing director at DB Realty Ltd.,

was “wrongly implicated” in the investigation, according to a company statement.

Ambani last month reached a settlement with regulators, agreeing to stay away from trading in equities until December. The accord is without admission or denial of guilt, Reliance Infrastructure said on Jan. 14.

The directors of Reliance Infrastructure and Reliance Natural Resources, which is owned by Reliance Power, paid 500 million rupees to settle an investigation that they violated overseas borrowing rules, the Securities & Exchange Board of India said in a statement dated Jan. 14.

Investor concerns over corruption, rising inflation and seven interest rate increases in a year have spurred foreign investors to sell $1.3 billion of shares in 2011 and triggered a 14 percent fall in the Bombay Stock Exchange Sensitive Index. The Sensex climbed 17 percent in 2010, the most among the world’s 10 largest stock markets, as optimism over economic growth and corporate earnings propelled record foreign inflows.

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