The intense scrutiny around the 2G scam has hurt Anil Ambani the most. As soon as the CEO of Swan Telecom was arrested, it was obvious that Anil Ambani could be in trouble soon after, especially because everyone knows Swan Telecom is just a proxy for Reliance Communications.
This has played out in the markets today, with ADAG stocks hammered to extremely low levels. RCOM has not reached this level even in the bear markets in March 2009!
Quite simply, if Anil Ambani is in trouble, all bets are off for Nifty and Sensex. Not only is the ADAG group significant in terms of its weight in the indices, Anil Ambani is also one of the most active players in the market, both through Reliance Capital as well as directly. The sentiment hit will be the knock out punch.
In such a scenario, which stocks are likely to get impacted the most? Right from the times of the Reliance demerger, it has been obvious that K V Kamath is extremely close to Anil Ambani. It is well known that Kamath crafted the demerger documents to give Anil Ambani all the new and growing businesses - Telecom, Capital, Power, Infrastructure, etc. He even tried to give Anil a significant stake in the Oil & Gas exploration business, by virtue of Reliance Natural Resources.
I expect that this proximity to Anil Ambani is likely to have played a role in ICICI funding the ADAG group in a big way. While RBI has restrictions on how much funding a bank can give to any single corporate, the RBI guidelines don't have limits on exposure to a group. The single biggest problem for ADAG has been that Anil had ownership of all the growth businesses, but the cash cow was retained by Mukesh. So Anil has always been starved of capital - this has hurt ADAG in many ways. All Anil's plans to raise cash have been thwarted - whether it was the plan to sell the towers business, or to sell RCOM to MTN. They have had to resort to debt funding on a mind boggling scale.
There is also the question of significant amount of pledged shares in the group companies. Back in March 2009, there was talk in the market of Anil Ambani being close to bankruptcy, because of the pledged shares. Back then he was saved by the big rally that more than doubled Nifty. This time around, ADAG shares are close to, or lower than their March 2009 lows. And the problems look a lot more severe this time around, with even talk of Anil Ambani being arrested.
Just a month back, it would have been unthinkable that Anil Ambani could be arrested. But then, the same could have been said about A Raja getting arrested!
This has played out in the markets today, with ADAG stocks hammered to extremely low levels. RCOM has not reached this level even in the bear markets in March 2009!
Quite simply, if Anil Ambani is in trouble, all bets are off for Nifty and Sensex. Not only is the ADAG group significant in terms of its weight in the indices, Anil Ambani is also one of the most active players in the market, both through Reliance Capital as well as directly. The sentiment hit will be the knock out punch.
In such a scenario, which stocks are likely to get impacted the most? Right from the times of the Reliance demerger, it has been obvious that K V Kamath is extremely close to Anil Ambani. It is well known that Kamath crafted the demerger documents to give Anil Ambani all the new and growing businesses - Telecom, Capital, Power, Infrastructure, etc. He even tried to give Anil a significant stake in the Oil & Gas exploration business, by virtue of Reliance Natural Resources.
I expect that this proximity to Anil Ambani is likely to have played a role in ICICI funding the ADAG group in a big way. While RBI has restrictions on how much funding a bank can give to any single corporate, the RBI guidelines don't have limits on exposure to a group. The single biggest problem for ADAG has been that Anil had ownership of all the growth businesses, but the cash cow was retained by Mukesh. So Anil has always been starved of capital - this has hurt ADAG in many ways. All Anil's plans to raise cash have been thwarted - whether it was the plan to sell the towers business, or to sell RCOM to MTN. They have had to resort to debt funding on a mind boggling scale.
There is also the question of significant amount of pledged shares in the group companies. Back in March 2009, there was talk in the market of Anil Ambani being close to bankruptcy, because of the pledged shares. Back then he was saved by the big rally that more than doubled Nifty. This time around, ADAG shares are close to, or lower than their March 2009 lows. And the problems look a lot more severe this time around, with even talk of Anil Ambani being arrested.
Just a month back, it would have been unthinkable that Anil Ambani could be arrested. But then, the same could have been said about A Raja getting arrested!
