Released on: October 17, 2007, 5:45 am

Press Release Author: Alan Peter

Industry: Energy

Press Release Summary: Are Government owned Insurance Companies hand in glove with
Mr Anil Ambani to divert thousands of crores of wealth of Reliance Energy
Shareholders to the personal gain of Mr Anil Ambani

Press Release Body: Indian Insurance Companies namely LIC, GIC, NIC, OIC, UIC & NIAC
hold 21.50% of the equity capital of Reliance Energy Limited with LIC alone holding
14%.Individual Indian Public hold 12% of REL. Reliance Energy Limited (REL) is a 78
years old private sector power major engaged in power generation and distribution.
REL is a part of and controlled by the Anil Ambani Group.

REL being one of the largest private sector player in the Power generation and
distribution, has been awarded large and mega power projects for 24200 MW. These
power projects have been awarded either directly to REL or to its nominees on the
strength of its financial and technical strengths. REL is having the capabilities to
execute all these projects on its own and its financial position is strong enough to
raise all the required finances for these projects. These power projects include
prestigious projects like Sasan, Dadri, Rosa etc.

REL, considering its eminent position was projected as and perceived to be the main
vehicle for execution of all major power projects. In fact bidding for all the major
power projects have been done by REL or by its associates with the technical and
financial support of REL.

However, a careful study of the draft red herring prospectus (DRHP) filed by another
Anil Ambani group company namely Reliance Power Limited (RPL), proposing to come out
with a Public Issue of 130 Crore Equity shares of Rs.2 each, reveals that the Power
Generation Business opportunities secured in the name of REL and those secured with
the strength of REL have been transferred to the said Company RPL by means of some
internal MOUs & understandings. As per the said DRHP, RPL would be implementing 12
Power projects in India having a capacity of 24200 MW. Further the draft prospectus
unambiguously declares that REPL will be the primary vehicle for investments in the
power generation sector by the ADA Group. The implication of this is very serious
for the future prospects of REL and its shareholders.

On the analysis of the RHP, it has come to light that RPL is a partnership between
the Chairman of REL, namely Mr. Anil Ambani/his Private Group with REL itself. Mr.
Anil Ambani, through his personal investment companies is holding 50% stake in REPL.

With this clandestine transfer of projects for 24200 MW from REL to REPL, the
Shareholders of REL have been deprived of the entire power generation business
prospects to be accrued to them. By means of such a transfer of business and
creation of another shell company to issue public shares, now the power generation
profits will accrue to the new company REPL in which Anil Ambani holds 50%. The new
Company has no resources at its command for executing these projects and instead is
totally dependent on REL for entire support - be it technical, manpower,
commissioning, even guarantees for raising finances

As per the various announcements and indications, the said Company, RPL is proposing
to mop up about Rs.8000 Crores of public money through this initial public offer. As
per recent news report by one of the Lead Managers, UBS, RPL has been valued at
about Rs. 70000 crores.(at a minimum) RPL itself has no experience or capability of
implementing these projects and thus the valuation of the Company is purely
reflecting the strengths of REL for these projects. This entire valuation of 70000
crores is the value of the projects that have been stripped off from REL as a scheme
for personal enrichment of Mr. Anil Ambani. If this Public Issue happens Mr Anil
Ambani will enrich himself by Rs 35000 crores , at the expense of crores of
Indian public. .

The Companies Act prescribes a fiduciary duty on the Directors of a Company to
ensure that the assets of the Company are used for the purposes of the Company and
enhance the wealth of its shareholders. The Act restricts in several ways any
transaction between a director and the Company to ensure that the director should
not misuse his position for any personal gain.

The Act also provides that significant assets of the Company can not be transferred
without the approval of the shareholders.

However all these have been given a complete go-by in REL. Here, the Chairman of the
Company has himself entered into a partnership with REL and transferred the valuable
assets in the form of projects awarded to it to the partnership company. He is also
using all the resources of the Company for his personal enrichment at the direct
cost of REL shareholders.

If these projects would have been implemented by REL, the valuation of REL would
have been higher by this amount and thereby benefiting the shareholders of REL
directly and millions of Indian Public indirectly through the gains made by the
Public Sector Insurance Companies.

It is surprising to note that LIC being one of the major shareholder and having a
nominee director on the Board of REL, in Mr V.R Galkar has remained a mute
spectator and has not even attempted to stop this . The Analysts suspect collusion
between the promoters of ADA group and the nominee director.

It is evident that the LIC & other Insurance companies have failed in their duty and
obligation to protect the interest of the general public who have invested their
hard earned savings in the Insurance Companies.

Analysts say that SEBI, has a duty not to allow this public issue and if it does ,
it will not be discharging its responsibilities under SEBI Act, which is to protect
the interests of investors in securities. Allowing this public issue will set a
dangerous precedent and Foreign Investors will lose faith on the integrity of Indian
capital market regulator.

In this context, the observations of Mr Damodaran, chairman SEBI, as reported in
Economic Times on 15th October 2007, is very relevant.

"Institutional Investors would have to play a proactive role to ensure that
promoters did not gain at the expense of minority shareholders" "When we talk about
Institutional Investors with large holdings, are they assertive enough? There are
companies where institutional investors together hold around 30% stake but, do they
attend AGMs. Have they been heard raising issues that they are un happy with at
AGMs?

Perhaps Mr Damodaran had the proposed public issue of Reliance Power in mind when he
uttered these words.


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