The Ambani siblings may have split the corporate empire Dhirubhai built, but the Reliance “family” of investors continues to be buffeted by the aftershocks of the bitter schism leading to the formal separation. The latest skirmish is over completion of demerger formalities and stock exchange listing of the Anil Dhirubhai Ambani Group (ADAG) companies. The terms of separation apparently require the Mukesh Ambani group to undertake all legal formalities involved in the demerger process, including listing of the emergent entities—Reliance Capital Ventures, Reliance Communication Ventures, Reliance Energy Ventures and the Global Fuel Management Services (now Reliance Natural Resources Ltd).
Accordingly, the Mukesh Ambani group began preliminary listing processes around Christmas last year, but the ADAG group was clearly not involved in, or informed about, their moves. Reliance rammed through board meetings of all four soon-to-be-separated companies on a single day in early January to finalise listing-related issues. It then made a detailed listing application to the stock exchanges and obtained clearance from the regulator to list the shares without a public issue under Sec 19 (2)(b) of Sebi regulations. At its recent meeting, the Sebi board even cleared a policy decision to permit demerged companies with a Rs 500 crore market capitalisation to become automatically eligible for derivatives trading.
On January 27, the Mukesh Ambani Group completed the electronic credit of the four ADA group shares to Reliance family investors. Simultaneously, in what may be the last major exercise of its kind, it completed the posting of a humungous 65 lakh physical share certificates to those investors who continue to hold physical share certificates.
Stock exchange sources say a detailed Information Memorandum, required under listing rules, has been filed with the bourses. This means all material documents and agreements are now available for inspection by shareholders for the first time since the demerger.
• The Anil Ambani Group wants to decide the formal listing dates
• This has led to confusion, created a growing grey market in ADAG shares
• Difficult to conceive why Sebi would discourage quick listing of ADAG shares
All that remains is the formal listing. This could have happened last week—at least in the case of Reliance Capital Ventures and Reliance Natural Res-ources—except that exchange officials seem to have baulked at strong objections raised by the Anil Ambani Group which wants to decide the listing dates.
This has led to confusion and created a rapidly growing grey market in ADAG shares. Brokers report some investors, confused between Reliance Capital and Reliance Capital Ventures, sold shares of the latter as soon as they were credited to their demat accounts. Investors ought to have checked carefully before rushing off to sell. But there would have been no room for confusion if the shares had been listed immediately. Although the grey market in Ahmedabad remains subdued after the IPO scam, Kolkata traders were offering quotes of Rs 261-Rs 271 for Reliance Communication Ventures and Rs 25-28 on Reliance Natural Resources (both have a face value of Rs 5).
That’s not all. The brokerage arm of an aggressive US bank is already hawking a P-note representing the combined underlying value of the demerged ADAG entities; it is being offered to foreign investors at the equivalent price of around Rs 275.
This growing unofficial market is dangerous. It is unclear why the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have not started listing at least some companies. Informally, sources say the bourses do not want to be caught in the crossfire between the Ambani brothers and are looking to the Securities and Exchange Board of India (Sebi) for direction. However, Sebi sources deny that stock exchanges have sought their advice.
It is difficult to conceive how, or why, the regulator would discourage quick listing of the ADAG shares since it would encourage expansion of grey market trades. Sebi can’t prevent investors from striking deals and transferring shares officially credited to their accounts. It is in everybody’s interest that the ADAG group companies quickly cut the umbilical chord with Reliance Industries and carve out their own identity in the business world. At current grey market prices for just two ADAG companies, the group seems set to unlock considerable value after listing to notch up an attractive market capitalisation on its own.