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Shares of companies controlled by Anil Ambani surged on Monday after 90 per cent of lenders to his Reliance Group reached an agreement to not sell shares pledged by the founders until end-September.
The pact comes just days after some lenders had dumped pledged shares as a sharp fall in equities led to a plunge in the value of their collateral. Under the new pact, the Reliance Group will pay principal and interest to the lenders as per the scheduled due dates specified in the loan agreements, an official spokesperson of the group said. The group also told lenders it has appointed investment bankers to sell its 30 per cent shareholding in Reliance Power.
Reliance Power Ltd., Reliance Infrastructure Ltd. and Reliance Communications Ltd. climbed about 20 per cent each while Reliance Capital Ltd. advanced as much as 12 per cent on the news.
We are grateful to our lenders for believing in the intrinsic and fundamental value of our companies, and granting their in principle approval to standstill arrangements, the group spokesperson said in a statement.
Earlier this month, some creditors sold 5.5 billion Rupees worth of shares in the four companies, according to filings. The sales by firms including L&T Finance Ltd. and Edelweiss Group were illegal, motivated and wholly unjustified, the Ambani group said in a statement.
Essel Group, a diversified conglomerate with interests ranging from media to packaging, faced a similar struggle in February. Essel signed a pact with lenders to stop credit of its group companies from being classified as in default until September, 30. The pact provided the group time to sell stakes in some of its companies, including raising a planned $1.2 billion from sale of part of Zee Entertainment Enterprises Ltd., Indias biggest publicly-traded television network.
Reliance Communications announced plans earlier this month to file for bankruptcy, adding to a litany of woes for the the Ambani-controlled business group. Shares were sold off as concerns spread to other group firms, eroding the value of the stock pledged as collateral.
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