Anil Ambani may well feel blessed on this auspicious day of Makar Sankrant….he and his companies have been let off lightly by SEBI today…his kites should fly higher from now…that’s my take on today’s SEBI Consent Order passed
In a Consent Order each of his two companies Reliance Infrastructure (earlier Reliance Energy) and RNRL (since merged with Reliance Power) and it’s Directors have been fined Rs 25 crs each…The companies cannot invest in the secondary markets till December 2012,except for mutual funds while Anil Ambani and the Directors have been barred from secondary markets till December 2011…Interestingly Raising Monies through Primary markets has been kept out of this Order…this must have been negotiated strongly…as Anil Ambani’s both Power Companies will surely require to raise huge Capital of thousands of Crores in the coming two years and even beyond as they step up their Capex Plans to complete and commence commercial operations in power projects and meet MW targets in the committed timeframe
The Consent Order means there is no admission or denial of guilt…consolation to those looking for it is that those involved are not exonerated from what happened
So what was this matter……..
In 2007 the then Minister of State for Finance Pawan Kumar Bansal accused Anil Ambani-led Reliance Infrastructure, earlier known as Reliance Energy, of violating overseas borrowing and foreign exchange rules by investing funds raised abroad in the domestic capital market.
Bansal also said that the Enforcement Directorate (ED) was examining the violation for necessary action against the company.
The company borrowed around USD 360 million in July 2006. In April 2007, it brought USD 300 million into India and invested it in debt mutual funds. It then remitted USD 500 million, including the proceeds of the USD 300 million brought into India, in March 2008 to invest in an overseas arm, Bansal added.
The company had also availed of USD 150 million through the approval route and the amount was brought into India in November 2006.
This charge was yet again repeated in December 2009 a written reply in the Rajya Sabha by the Minister of Finance Namo Narain Meena…that RBI had spotted the use of external commercial borrowings in that these were used for investment in domestic debt funds violating ECB guidelines
So let’s put this in context
Rs 50 crs is the highest SEBI Fine imposed so far…..assuming ADAG companies misused all of the US $ 500 million overseas borrowings to invest in India…they would have made fixed returns in access of US $ 50 million over a year or two…that’s near Rs 250 crs minimum…so Rs 50 crs is 20% of this……the companies must have reinvested these earnings too….so Rs 50 crs Fine may actually work out even lower than the 20% I am assuming