Market Reaction: Sharp Decline Despite Clarifications
Shares of Reliance Power and Reliance Infrastructure declined by as much as 5% on Monday, hitting lower circuits at ₹46.49 and ₹275.05 respectively. The sell-off followed news of a Central Bureau of Investigation (CBI) probe into an alleged ₹2,929 crore bank fraud involving Reliance Communications, a company formerly led by Anil Ambani.
Despite official statements distancing the two companies from the investigation, investor sentiment remained cautious. While broader indices held steady, Reliance-linked stocks faced concentrated selling pressure.
Background: Allegations and Timeline
- The CBI conducted search operations at Anil Ambani’s residence and offices of Reliance Communications over the weekend.
- The investigation stems from a complaint filed by State Bank of India (SBI), alleging misappropriation of funds and fraudulent transactions.
- SBI’s exposure includes ₹2,227.64 crore in fund-based loans and ₹786.52 crore in bank guarantees.
- Anil Ambani has denied all allegations, stating he was a non-executive director at the time and had no involvement in daily operations.
Company Response: Clear Separation from Reliance Communications
Reliance Power and Reliance Infrastructure issued statements asserting:
- They are independent listed entities with no financial or operational linkages to Reliance Communications.
- Anil Ambani has not served on their boards for over 3.5 years.
- The investigation pertains solely to Reliance Communications, which has been under the control of a committee of creditors and a resolution professional for the past six years.
Regulatory Context: Broader Enforcement Activity
This development follows a series of regulatory actions:
- The Enforcement Directorate (ED) recently searched 35 locations linked to Reliance Group entities, investigating alleged money laundering and loan diversion totaling ₹17,000 crore.
- SEBI rejected a settlement plea by Anil Ambani and his son related to Yes Bank’s AT-1 bonds, citing investor losses of ₹1,828 crore.
- A separate ₹68.2 crore fake bank guarantee case involving Reliance NU BESS Ltd and Maharashtra Energy Generation Ltd is also under investigation.
Investor Takeaways
Despite company reassurances, the market reaction highlights the importance of governance clarity and perception risk. Investors should consider the following:
Short-Term Strategy
- Avoid fresh exposure to Reliance Power and Reliance Infrastructure until volatility subsides.
- Monitor regulatory updates and company disclosures closely.
Long-Term Outlook
- Reliance Infrastructure maintains a strong order book in EPC and urban infrastructure.
- Reliance Power’s asset base and debt restructuring efforts may offer upside once sentiment stabilizes.
Risk Factors
- Legal overhang may persist.
- Any new regulatory action could trigger further downside.
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Closing Note
While headlines may cause short-term volatility, informed investors should focus on fundamentals, governance, and regulatory clarity. Eqwires Research Analyst will continue to monitor developments and provide timely updates through its daily market blogs and advisory desk.
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