Dinesh Narayanan

Mumbai, Dec. 31

SEVERAL days after certain past investment decisions of the Reliance group surfaced in the media, the Securities and Exchange Board of India (SEBI) has reportedly asked stock exchanges to look for violations of listing agreements. However, it is yet to finish investigating charges of violations, including alleged unauthorised share allotments, against the group and dating between 1994 and 2000.

Consider two companies that hold substantial equity in RIL and are close to its promoters. Yangste Trading (previously called Reliance Research and Management Pvt Ltd) and Tresta Trading do not have employees; do minimum trading; have hardly any assets; yet managed to raise nearly Rs 300 crore each by issuing unsecured, zero-coupon, fully convertible debentures. They were, however, active in badla financing of stocks until 1999-2000 and earned identical sums Rs 1.25 crore as income from that route, according to their annual reports of 2001, the year in which they were allotted RIL shares.

For nearly three years, SEBI has been looking into how 34 small trading firms - Yangste and Tresta among them were allotted 12 crore RIL shares whose market value then was over Rs 3,000 crore.

These companies also own large stakes in one another. For example, Tresta owns one-fourth of the paid-up capital of Yangste and vice versa. In March 2001, Yangste had a paid-up capital of Rs 8 lakh and Tresta, Rs 5 lakh. The investments of both were valued at Rs 625 crore. Apart from RIL shares, the two companies had invested about Rs 120 crore each in debentures of Sanchayti Mercantile Pvt Ltd, an unlisted company that owns about 2.5 per cent stake in RIL.

The SEBI Chairman, Mr G.N. Bajpai, did not respond to questions on the issue.

In reply to an e-mail on ownership of a host of companies, including these, an RIL spokesperson said: "Reliance Industries would not like to comment on the ownership of these companies, as these are in the private domain."

In October 2002, SEBI had requested the Finance Ministry to ask CBI to probe possible criminal angles in two private placements of Reliance Industries' debentures with warrants to the Unit Trust of India and these companies, which it suspected were connected to RIL promoters. It had mentioned in a letter that it was also continuing its own investigations into the private placements, which appeared irregular.

Both Yangste and Tresta, which were part of the investigations, have one Mr U.C. Damani and one Mr R.N. Jhaveri as their directors. The RIL spokesperson did not reply when asked whether Mr Damani and Mr Jhaveri were Reliance employees and whether all the companies were acting in concert.

According to an information filed with the Bombay Stock Exchange, apart from the promoters' holding of 12.63 per cent, persons acting in concert with the promoters own 34 per cent in the company. The filing reveals that 14 companies acting in concert, each holding between 1 per cent and 2.5 per cent, own about one-fifth of RIL's equity.

(This article was published in the Business Line print edition dated January 1, 2005)
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