 Hello and welcome to NewsClick. This week, I talk about Anil Ambani or rather a very, very angry Anil Ambani. This is interesting because Anil Ambani used to be the swerve face of the Reliance group even when it was very controversial in the 1980s and early 90s. He spoke to the media, he was everybody's friend and those days under Chairman Deruba Ambani, Reliance never believed in filing defamation cases. They believed in winning people over. But all that seems to have changed. In fact, even when Anil and Mukesh Ambani engaged in a huge war of words around the turn of the century, 2003, 2004, all of us would remember them washing their dirty linen in public. They made nasty allegations against each other. And through it all, it seemed as though Anil Ambani had the upper hand because he had the ear of the media. And when in 2005 they entered into a settlement, that was seen as a victory for him. But not anymore. In fact, over the last year after he's got into defence and the controversial Rafali jet purchase deal, he has been on a suing spree. So he's filed defamation cases against dozens of journalists, media houses, politicians. In fact, I think NewsClick itself has totaled up the number of defamation cases filed by him and it is a stupendous 75,000 crore. In fact, each defamation case is an absurd thousand to 10,000 crore. These numbers are important from the market perspective because they have a lot of relevance. It's not just the Rafali deal. He's also filed defamation cases when people spoke about the price and details of the deal that he signed for the sale of his power distribution company in Bombay. And he's also filed another suit on the telecom assets that he sold. Now look at what happens. We as investors, if you are a lay investor, depend on experts, analysts, fund managers and the media to give you information, that is to dig up information, give you information that's not in the public domain or to analyse information. Each time that happens or you want to try and put out information in the public domain, if you're going to be gagged with the defamation suit, then it has humongous implications for anyone who is going to invest in the market because India has adopted what is called a disclosure based regime. This means that information is going to be in the public domain, companies are going to make disclosures, analysts are going to disclose information and you are supposed to make a judgement call on whether or not to buy shares, hold them or sell them based on what you hear. If all of this is stopped and gagged because there are defamation suits, what is going to happen to you? Let me give you two examples of how this works and how we are moving into a very dangerous territory. So last week I spoke about Z and you know what happened in Z? The stock price was hammered down about 25-30% because there was a news item in the wire which said that there was some investigation going on into a group company which was allegedly involved in the demonetisation and cash transactions. Let's not get into that. The point is that when the stock prices fell, Subhash Chandra the chairman came forward and said he apologised and mutual funds then came together and said we are going to give him time. This happened because you had the chairman of Z reacting instantly and trying to quell the danger and the fear that was in the market. If that hadn't happened there would be a freefall and we don't know where it would have gone. It is not being investigated and there was no gagging of the media. That's why it's in the public domain. Then you have ILFS, another huge problem, an outstanding debt of 1 lakh crore, 348 companies stepped down subsidiaries. Nobody even knew there was so much. The government of India thought there were only 160 odd companies and why did all this happen? Because the Reserve Bank of India failed to do its job. So throughout all this also it is again various analysts, the media and others who began to put out information afterwards in the public domain which has enlightened people. Look at what is happening in the third case where we are again talking about Anil Ambani and a group called Edelweiss. It turns out that Anil Ambani had invested, God knows what he invested in but Anil Ambani had pledged his shares in reliance power with one of the Edelweiss group companies which got a little nervous about its holding when stock prices have been collapsing. Look at what is happening to the Anil Ambani group. While he is on a suing spree the entire group has been losing value. In fact they have lost 68% of market value of 47,300 crore in the last 12 months. Now here is a company called Edelweiss which apparently took a judgement call. I am not going to get into whether they did the right thing or not. The discussion that we are having is can people decide, can information come out in the public domain, can people have the right to decide when they buy something, whether to hold and whether to sell. In this case it is not an individual investor, it is an institution that has made a decision and it is decided to sell. The stock prices were hammered down. So what happened Anil Ambani went ballistic again. This time he has filed a case, he moved the Bombay High Court and he demanded that Edelweiss should buy back the shares at a huge loss to themselves. It has never been done before. The matter went to court. The court of course refused to give him a stay order and the hearing will continue. He didn't stop at that. He has also written an angry letter to the Securities and Exchange Board of India where he wants an investigation into what Edelweiss did and he wants Edelweiss declared not fit and proper. Now not fit and proper in the capital market is like a death warrant because you then can't be on board. There are a lot of things that you can't do. So what he has asked for is a very, very serious kind of action. In fact, ironical because when Anil Ambani was in trouble he paid a 50 crore settlement and got away without admitting or denying anything. But here he wants something even bigger, declared them not fit and proper. All this is going to play out in the next few weeks. But let's look at whether Edelweiss had grounds for doing what they did or as some would say why didn't they do what the lenders of Zee did. Now like I said again, in the case of Zee, Zee at least came forward and said I'll find a strategic buyer, I'll raise the money and I'll pay. So please don't sell the shares in the market even though presumably he didn't have the money to top up of increase the collateral because all this is borrowing against shares held by the promoter. In Edelweiss it's an exact similar situation. It is shares pledged by the promoter and as it has come out in court, Edelweiss was well within its rights to sell with a 24 hour notice. So they sold on 5th February, stock prices crashed. They sent a notice on the 4th, fulfilled their 24 hour criteria. The judge pointed this out also in the first hearing when he refused any interim order or relief to Anil Ambani. Question is, is Anil Ambani right in saying what he has to do or is Edelweiss correct in its position? Edelweiss's point is that look at the scenario. This man is controversial, he's making the news for the wrong reasons, he's fighting with everybody. He's got a case against him by the telecom giant Ericsson which says that he's not able to repay as little as 550 crore. Little is in a context, 550 crore is a small number given the size of the Anil Ambani group. He's not able to repay to the extent that this matter has now reached the Supreme Court. Anil Ambani had to be personally present and what he said over there is that he couldn't repay because his big deal where he was supposed to get 23,000 crores from his brother Mukesh has fallen through and not going to happen. Ericsson has been arguing that he has a lot of other money and he has personal guarantees and this was not linked to it. If you are stepping back and watching it as an investor, what are you to make of it? Does the man have money? Anil Ambani did something else. He went and filed for bankruptcy himself through the telecom company. If you were sitting on shares pledged by him, would you worry that the price is going to crash? Anybody who's invested in the market knows that when there is a stampede, when the market collapses or a particular stock collapses, there are no buyers so the stock takes a vertical plunge and whoever is the fastest to be able to put his sell orders or hit the exit gates at least recovers some money. I guess that is what Edelweiss tried to do. Anil Ambani has made other allegations. He's talked about whether they also sold at the futures market, whether there was any other attempts to depress the stock. I don't know about that. That will be investigated by Sebi. Now to my mind, if they did something like going beyond selling his shares and they get caught for it, then that deserves to be punished but it's an entirely different ballgame and it's not being checked. But if it is purely based on what they did with the shares that were pledged, then prudence and common sense demands that you look around you, you look at what is happening and you act and the person who acts the fastest is the one who's going to recover the most money. And in most cases where shares are pledged, usually there is a haircut which means that if the market price is X, the number of shares pledged would have been as much as 50% more than that value. So there is an advantage to them to selling. So even when the stock price crashes, they stand to not lose money by taking action quickly and fast. Now this case is also going to be heard by the Bombay High Court. But here's a clear case where I as an investor or an investor activist, I'm asking this simple question. A, if this is not Adelweiss, it's a mutual fund and it had done the same thing. It is acting on my behalf, my money may be there and when mutual funds are sold to me, I'm not supposed to be an investment expert. I'm supposed to depend on the expert to do the right thing for me in his fiduciary capacity. So if this were a mutual fund and not Adelweiss, I would expect that they actually look at what is happening and act to protect my interest as they claim to have done in Z. So does Anil Ambani have a case? It remains to be seen.