Billionaire loses $2.6B in stock market — in one day

Billionaire Anil Ambani blamed “vicious and illegal” trading for a one-day stock rout that wiped out $2.6 billion in the market value of his six publicly traded companies. The plunge, led by a 19 percent drop in Reliance Infrastructure Ltd., dragged India's benchmark Sensitive Index to a seven-month low yesterday. The group said “unscrupulous corporate rivals” spread rumors that led to “panicked” sales, according to an e-mailed statement. It's a familiar refrain for investors. Three weeks ago, Ambani criticized media reports based on unidentified sources and rumors in a press conference where he said he had agreed not to trade in shares for a year after an investigation by the stock market regulator. Since then, the combined value of his listed companies has plunged by 27 percent to $17.2 billion, according to data compiled by Bloomberg. “Every time there's a development there will be a media reporting and media scrutiny, which we welcome,” Ambani, 51, told reporters in Mumbai on Jan 16. “But most of it is based on rumors and sources and nothing is based on facts.” Four phone calls made to Ambani's office in Mumbai yesterday were unanswered and an e-mail elicited no response. India's stock market is the world's worst performer after Egypt this year as a combination of corruption scandals, rising inflation and Asia's most aggressive round of interest-rate increases have dimmed investor appetite for Asia's third-biggest economy. Ambani's telecom and infrastructure companies have fallen the most among benchmark stocks this year. Stock Sell-Off Reliance Infrastructure, the builder of a mass rapid transit system in Mumbai, today gained 10 percent, the most since May 2009, in Mumbai trading after the biggest drop in more than two years yesterday. Reliance Communications advanced 2.1 percent following the steepest fall in 13 months yesterday, while Reliance Power Ltd. was little changed after sinking 9.6 percent yesterday. Reliance Infrastructure said yesterday after trading hours that it will on Feb. 14 consider a proposal to buy back shares. Reliance Infrastructure was the best performer among the 30 stocks of the Sensitive Index today. ‘Rumors' Yesterday's sell-off was in part sparked by an NDTV Television report that an Indian auditing body was seeking information about Ambani's companies. The Institute of Chartered Accountants of India President Amarjit Chopra later said the group had written to auditors of Reliance ADA Group. Reliance Infrastructure said in an e-mailed statement its auditors had received no inquiries from the accounting group. The yield on Reliance Communications's zero-coupon convertible bonds maturing in March 1, 2012 rose 46 basis points to 10.28 percent today, the highest since May 2010, according to Elara Capital Plc prices. It jumped 220 basis points to 9.81 percent yesterday. It fell 50 cents to $115.0 today. The company will repay bondholders $127.69 on maturity. “A series of completely baseless and motivated rumors have been spread today by our unscrupulous corporate rivals,” Reliance ADAG group said yesterday. “This has been accompanied by vicious and illegal bear hammering of our listed stocks, to create panic and destabilize the markets.” Probe, Arrest Reliance ADAG said it had asked the stock market and capital markets regulator to investigate yesterday's trading. National Stock Exchange spokeswoman Divya Malik Lahiri said the bourse hadn't received a complaint from the group. N. Hariharan, spokesman for the Securities and Exchange Board of India Ltd., didn't answer three calls made to his mobile phone. The first corporate arrest late on Feb. 7 in a multibillion-dollar probe into mobile-phone licenses also contributed to the decline in Indian stocks yesterday. DB Realty Ltd., a Mumbai-based developer, said neither the company nor its detained managing director did anything “inappropriate or illegal” when it won a permit to operate a wireless network. The stock declined 5 percent yesterday, after earlier falling 20 percent. Ambani last month reached a settlement with regulators, agreeing not to trade in equities until December. The directors of Reliance Infrastructure and Reliance Natural Resources, which is owned by Reliance Power, paid 500 million rupees ($11 million) to settle an investigation that they violated overseas borrowing rules. The accord is without admission or denial of guilt, Reliance Infrastructure said on Jan. 14. Not the Best “The companies' balance sheets are not the best and are very difficult to understand and corporate governance is not very strong at the company,” said Juergen Maier, a Vienna-based fund manager for Raiffeisen Capital Management that oversees about $1.3 billion of assets. Maier does not own Anil Ambani company shares. Ambani “promised a lot but has been unable to deliver on those promises.” Anil's wealth has diminished along with the drop in the group's market value, according to estimates by Forbes magazine. In 2010, his net worth was less than half of his older brother's, Mukesh, who ForbesAsia valued at $27 billion, with Anil at $13.3 billion. The decline started in 2008, when Anil's net worth fell by $32 billion, the magazine estimated in its annual listing of the world's wealthiest. Profit Decline Reliance Communications, Anil's flagship company, saw profit plunge 40 percent to $99 million for the quarter ended Sept. 30 and will report third-quarter earnings on Feb. 14. The stock has lost 34 percent this year, the second-worst performer on the 30-stock benchmark Sensex after Reliance Infrastructure, which has lost 31 percent. Nineteen of the 44 analysts tracked by Bloomberg recommend selling the mobile-phone operator, 14 recommend holding, and 11 recommend buying. The brothers split their family business after their father Dhirubhai Ambani died in 2002 without leaving a will. They started the truce process following a May 7 Supreme Court verdict asking Mukesh-controlled Reliance Industries Ltd. and Reliance Natural Resources, an Anil Dhirubhai Ambani Group company, to renegotiate a contract over natural gas supplies. Mukesh and Anil agreed to end a 2006 no-competition agreement on May 23 that allowed them to enter each other's businesses. “When the brothers originally split up, the idea was that one was handling a very mature business, while the younger one has the growing businesses -- power, telecommunications -- which were all the flavors of the day, and would grow dramatically and draw a lot of foreign investors,” said A. S. Thiyaga Rajan, senior managing director at Aquarius Advisors Pte in Singapore, which has about $350 million under management, with no holdings in Anil Ambani group companies. “That has not happened.” --Bloomberg News--