Reliance Infra down on reports of ED probe

18 Feb 2009, 1537 hrs IST, ET Bureau & Agencies

MUMBAI: Reliance Infrastructure lost more than 4% on reports that it violated overseas borrowing norms by investing funds raised abroad in the domestic capital market. At 3:21 pm, the stock was at Rs 500.55, down 3.54%. Earlier in the day, it touched a low of Rs 496.25 and later recovered to Rs 529.50. Over 34 lakh shares changed hands on BSE.

According to a Bloomberg report, the violation relates to overseas loans of $360 million raised by Reliance Infrastructure in July 2006. Quoting the junior finance minister Pawan Kumar Bansal, the report said that the Directorate of Enforcement is now examining the violation for necessary action.

The case goes back to April 26, 2007, when the company brought $300 million into India and invested it in debt mutual funds. It then remitted $500 million, including the "proceeds of the $300 million brought into India" in March 2008 to invest in an overseas subsidiary, Mr Bansal said.

The minister said that the country's External Commercial Borrowing (ECB) rules in force at that time required funds raised overseas to be kept outside India until actually needed and they couldn't be used for investing in the capital market.

India's central bank had imposed a penalty of Rs 1.25 billion ($25 million) on the company, the minister said without giving a date. Reliance Infrastructure had "contested" the penalty, according to a Financial Times report on December 24, said the report.

via:E.T