Systematic hammering of Reliance Infra scrip

PRIVATE AND CONFIDENTIAL

February 9, 2011

The Member (Investigation)

Securities and Exchange Board of India

SEBI Bhavan, Plot No.C4-A, G Block,

Bandra Kurla Complex,

Mumbai 400 051

Respected Sir

Sub: Systematic and fraudulent hammering of the scrip of Reliance Infrastructure - Manipulation of stock market prices for illegal unjust enrichment, by bear operators and vested interests, and to discredit the fair reputation of our group - Attempt to destroy confidence of millions of retail investors

Blatant violation of the SEBI Act and SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations - Request for in-depth investigation under Section 11C of SEBI Act/ other relevant provisions, and deterrent punishment through passing of appropriate orders under Sections 11(4)(b), 11B and 11D of SEBI Act

Reliance Anil Dhirubhai Ambani Group is one of India's leading business houses, with a track record of value creation for the benefit of its around 10 million domestic and international, institutional and retail shareholders.

Reliance Infrastructure Limited (RInfra), a group company with 1.45 million shareholders, is India's largest infrastructure Company. RInfra is India's leading utility company having presence across the value chain of power business i.e. Generation, Transmission, Distribution, EPC and Trading and the largest infrastructure Company, developing projects in all high growth areas in the infrastructure sector i.e. Roads, Highways, Metro Rails, Airports and Specialty Real Estate.

It is an unfortunate fact that, today a vicious and systematic stock market operation to hammer the RInfra scrip down was unleashed by powerful vested interests, in an attempt to distort the market, and destroy the confidence of millions of investors. This is borne out by, inter alia, the following facts:

The RInfra stock price details as on 9th Feb 2011:

While the systematic and fraudulent hammering is going-on since last few weeks, today the RInfra price was brought down to Rs. 534.70 on BSE and Rs. 531.70 on NSE, a decline of over 26% - destroying value of over Rs. 4,000 crore in just a single day.

Today, bear operators and vested interests artificially pressed sell orders at a price substantially lower than the ruling price. Clearly the same were only to create panic and were not part of a routine and orderly disposal of shares.

A study of the bid-ask spread and the best bid-ask quantities in RInfra will show that huge sell orders were entered by these vested interests and such orders have not necessarily resulted into trades.

In several instances, the visible quantity was much larger than the traded quantity, leading to the suspicion that large quantities were displayed to create panic, and then the quantities were withdrawn by canceling or modifying the orders. All of this point towards a pre-meditated manipulation to hammer down the RInfra stock price.

Needless to state, this compressed and unprecedented burst of selling resulted in a sharp decline in the stock price, triggering off panic in the minds of investors.

This campaign of bear hammering by the vested interests was also accompanied by rumor mongering and spreading false and baseless information with sole intent to create panic and hammer our stock price.

We have credible market information which suggests that this vicious and pre-meditated selling was carried out by a group of bear operators and vested interests, in an attempt to discredit our group's reputation, and also unjustly enrich themselves by blatant price manipulation at the cost of millions of genuine investors.

This is also evidenced by the fact that, simultaneously, all stocks belonging to the Reliance ADA Group, i.e. Reliance Communications, Reliance Capital, Reliance Power, Reliance Broadcast Network and Reliance Media World, were subjected to the same vicious selling, bringing their prices down between 8% and 17% in a single trading session, in a manner disproportionate to the overall decline in the market.

This entire selling operation and resultant price manipulation is in complete violation of the SEBI Act and SEBI (PFUTP) Regulations, and inter alia the following regulations:

Reg 3 - Prohibition of certain dealings in securities

No person shall directly or indirectly-

(a) buy, sell or otherwise deal in securities in a fraudulent manner;

(b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under;

Reg 4 - Prohibition of manipulative, fraudulent and unfair trade practices 

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. 

(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- 

(a) indulging in an act which creates false or misleading appearance of trading in the securities market; 

(b) dealing in a security not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress or cause fluctuations in the price of such security for wrongful gain or avoidance of loss;

(e) any act or omission amounting to manipulation of the price of a security; 

(r) planting false or misleading news which may induce sale or purchase of securities.

Accordingly, we request you to kindly investigate this matter fully in exercise of your powers under Section 11C of the SEBI Act, SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations and other relevant provisions, by calling for all relevant information and data from the BSE and NSE, relating to trades in the aforesaid Reliance ADA Group stocks in the cash and F&O segments, including inter alia, the quantities of shares sold, the names of the brokers and their clients, the pattern and timing of the sales, the funding of margins, etc.

For this purpose, it is also requested that an analysis, inter alia, of the order log and trade log of trades in RInfra and other stocks of our Group, which lead to the price hammering, may also be conducted. Likewise, the use of synchronized trading, and automated order entry of large sell orders may kindly be examined.

We also request you to kindly examine the dealing room records including records of phone calls and SMS of all persons at the broking firms where majority of sale transactions took place.

It is further requested that appropriate orders under Sections 11(4)(b),11B and 11D of the SEBI Act and SEBI (PFUTP) Regulations may kindly be passed, directing the perpetrators of this bear hammering operation inter alia to Cease and Desist from engaging in such illegal activities, prohibiting them from trading in the securities markets, and impounding their ill-gotten gains, for deterrent punishment of the guilty, and for restoring investor confidence in the securities markets, and maintaining their faith in the regulatory system.

Thanking you

Yours faithfully

For Reliance Infrastructure Limited

Ramesh Shenoy

Company Secretary

Cc: The Chairman

Securities and Exchange Board of India

SEBI Bhavan, Plot No.C4-A, G Block,

Bandra Kurla Complex,

Mumbai 400 051