Reliance Capital’s public shareholders to take big hit; Anil Ambani barely hurt

Public shareholders of Reliance Capital, holding over 97 per cent in the company, will take a major hit with the RBI superseding the NBFC’s board even as the ousted promoter-Chairman, Anil Ambani, walks away, barely bruised, as he had reduced his stake to less than 2 per cent by March 2020 from over 52 per cent in December 2018.

Even as the promoters were selling the shares, retail investors were lapping them up. Data with BSE show that the promoter group, led by Anil Ambani and his family, owns just 1.51 per cent stake as on September 30, 2021, while public shareholders held 97.85 per cent. Retail shareholders with a share capital of up to ₹2 lakh hold as much as 57.53 per cent.

Promoter stake cut, red flag

Foreign portfolio investors, who held as much as 22.74 per cent as on June 30, 2019, owned just 0.43 per cent by September 30, 2021. JN Gupta, Managing Director, Stakeholder Empowerment Services, said: “Past failures such as those at YES Bank and DHFL indicate that rarely a company with high promoter stake fails… The first red flag is when the promoter stake begins to come down. This should be a trigger for the RBI to sit up and take action, rather than wait till the company completely fails.”

LIC, with a stake of 2.98 per cent, is the single largest shareholder of Reliance Capital. Ramkrishna Reddy Chinta is another large shareholder (2.16 per cent), with his RKR Investments Services Private Limited holding a further 1.43 per cent. The RBI must re-look ownership norms, setting also a minimum threshold, Gupta said.

Advisory panel

Simultaneously, the RBI has constituted a three-member Advisory Committee to assist the Administrator of Reliance Capital. The members are Sanjeev Nautiyal, former Deputy Managing Director, SBI; Srinivasan Varadarajan, former Deputy Managing Director, Axis Bank; and Praveen P Kadle, former MD and CEO, Tata Capital.

RBI supersedes the board of Anil Ambani’s Reliance Capital