Anil Ambani-led companies slide on regulatory action

14th Dec'09
Three Anil Ambani-led companies declined 0.71% to 1.17% at 15:11 IST on BSE after the finance ministry and Reserve Bank of India reportedly barred them from borrowing abroad for violating guidelines.
Meanwhile, the BSE Sensex was down 3.37 points, or 0.02%, to 17,115.66
Reliance Communications (RCom) lost 1.17% to Rs 181.45 in volatile trade. The stock swung between a high of Rs 186.50 and low of Rs 180.60 so far during the day. Reports of RCom looking to sell an undersea fiber optic network FLAG and a related US business, hoping to raise around $3 billion in cash, led the rally in the stock earlier in the day. However, the reports were denied by the company's spokesman in a clarification to a news agency, which triggered the fall.
Reliance Power (down 0.71%), and Reliance Natural Resources (down 1.14%), edged lower.
As per reports, three Anil Ambani group companies - RCom, Reliance Power, and Reliance Natural Resources (RNRL) were barred from borrowing abroad under the so-called automatic approvals route after they were found to have violated the external commercial borrowing (ECB) guidelines for loans to the tune of $2 billion.
As a result, any application from Anil Ambani group companies for ECBs or foreign currency convertible bonds (FCCBs) will be considered only under the approval route.
Under the automatic route, a company can raise funds directly from the overseas market, whereas it will require prior Reserve Bank of India (RBI) approval for raising funds under the non-automatic route.
Of the $5.3 billion that the Anil Dhirubhai Ambani Group (ADAG) has raised so far in 16 applications, more than 80%, or $4.25 billion, has come through the automatic route in 12 applications. The remaining 20%, or $1.05 billion, was raised in 4 applications under the approval route. RCom has led the chart with 9, of a total of 12, via the automatic route.
The difference between the rate at which these funds can be raised overseas and at which they can raised locally, can be as high as 400 basis points
Separately, Reliance Communications' share price estimate was cut to Rs 160 from Rs 210 at a foreign broking house which cited the effect of increased competition on earnings. The brokerage kept a sell rating on the stock