anil ambani group says indian investigators examined officials

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Anil Ambani Group Says Indian Investigators ExaminedOfficialsFebruary 12, 2011, 5:24 AM EST

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By Madelene Pearson and Ketaki Gokhale

Feb. 12 (Bloomberg) -- Anil Ambanis group said Indian federal investigators examined some of its officials, hours

after reporting it knows the brokers who spread sensational charges that caused a $2.6 billion loss in value Feb.

9.

The Central Bureau of Investigation is reportedly examining a large number of telecom companies and their

officials over the past several weeks, in relation to various matters relating to the years 2001 to 2008, Reliance

ADA Group said in an e-mailed statement today, without elaborating. As part of this process, CBI has also

examined a few officials of Reliance ADA Group.

The group, which has power, mobile-phone and infrastructure businesses, said yesterday brokers sent e-mails,

text messages and made telephone calls disseminating baseless accusations about its firms and sought an

investigation by Indias capital- markets regulator. The groups flagship, Reliance Communications Ltd., plunged

15 percent this week, as analysts predicted the company will post a sixth straight drop in profit on Monday.


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Earnings are immaterial now, said Jigar Shah, an analyst with Kim Eng Securities India Pvt. in Mumbai who has

a sell rating on the shares. What is critical is how they are able to reduce debt levels.

Reliance Communications fell as much as 7.1 percent yesterday to 89.70 rupees, the lowest level since trading

began March 7, 2006, as investors are concerned lower profit will constrain the ability of Indias most indebtedmobile-phone operator to cut loans. It rose 0.6 percent at close of trading.

Worst Performer

The mobile-phone company is the worst-performing stock in Indias benchmark index this year. Billionaire

Ambanis Reliance Infrastructure Ltd. is the second-worst.

The Bombay Stock Exchange Sensitive Index is the worlds worst-performing benchmark gauge apart from Egypt

this year. The Sensex rose 1.5 percent yesterday.

Indian investigators are probing telecommunication companies after a government panel said Feb. 4 that the

Department of Telecommunications failed to follow guidelines while allocating mobile-phone airwaves. The

Comptroller & Auditor General of India said in November airwaves were sold for an unbelievably low $2.7

billion.

Reliance Communications net income may fall 66 percent to 3.7 billion rupees ($81 million) in the third quarter,

according to the average of 25 analyst estimates compiled by Bloomberg. The company reports Feb. 14.

Debt Burden

The companys net debt increased more than eight-fold to about 292 billion rupees as of Sept. 30 from 33.7 billion

rupees at the end of September 2007, according to its quarterly reports. The operator will cut investment in

capacity expansion as it aims to become debt free in three years, Ambani said last year.

Ambanis companies plunged Feb. 9, after which the group said vicious and illegal rumors sparked a sell-off.

The company, Indias second-biggest mobile-phone operator, was in talks to sell a stake or do an initial public

offering of its mobile-phone tower unit after negotiations to sell it to GTL Infrastructure Ltd. collapsed Aug. 31.

The board also approved a separate plan to sell a 26 percent stake in itself at an appropriate premium to the

market price, to a strategic buyer or a private equity firm, the company said in an e-mailed statement June 6.

There have been so many attempts by the company to dilute equity and raise some capital, but nothing has

materialized, said Yogesh Kirve, an analyst at Anand Rathi Financial Services Ltd. in Mumbai. He has a sell

rating on the shares.


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Wireless Spectrum

Reliance Communications is trying to reduce debt after it and rivals Bharti Airtel Ltd. and Vodafone Essar Ltd.

spent a combined $15 billion buying third-generation wireless spectrum in India, where call rates are as cheap as

a half-penny a minute.

Reliances average revenue per user, a key measure of performance in the mobile-phone industry, dropped 38

percent in the second quarter.

Call rates have plunged in India since 2009 as new entrants including Japans NTT DoCoMo Inc. and Norways

Telenor ASA triggered a tariff war. More than a dozen operators are competing in India, which had 730 million

mobile-phone accounts as of November, making it the worlds biggest market after China.

Nineteen of the 44 analysts tracked by Bloomberg recommend selling Reliance Communications, 14 recommend

holding and 11 recommend buying.

Ambani blamed rumors for the Feb. 9 plunges in shares of his groups telecoms, power and infrastructure

companies.

Unscrupulous Rivals

A series of completely baseless and motivated rumors have been spread by our unscrupulous corporate rivals,

Reliance ADA Group said then. This has been accompanied by vicious and illegal bear hammering of our listed

stocks, to create panic and destabilize the markets.

Ambanis wealth has diminished along with the drop in the groups market value, according to estimates by

Forbes magazine. In 2010, his net worth was less than half of his older brother Mukesh, who ForbesAsia said was

worth $27 billion. Anil Ambanis worth was estimated to be $13.3 billion.

The decline started in 2008, when Anil Ambanis net worth fell by $32 billion, the magazine estimated in its annual

listing of the worlds wealthiest.

--With assistance from Mehul Srivastava and Rakteem Katakey in New Delhi, Siddharth Philip in Mumbai and

Anand Krishnamoorthy in Singapore. Editors: Cherian Thomas, Arijit Ghosh

Paul Tighe at [email protected]

To contact the reporters on this story: Ketaki Gokhale in Mumbai at [email protected]; Rakteem Katakey

in New Delhi at [email protected]; Madelene Pearson in Mumbai at [email protected]


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To contact the editors responsible for this story: Young-Sam Cho at [email protected];

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