Reliance Power shares fall 2% as ED seizes Sasan Power shares worth Rs 2,027 crore

Reliance Power Ltd shares fell 2 per cent in Wednesday's trade, after after the Enforcement Directorate (ED) issued a seizure order covering shares worth Rs 2,026.65 crore in its wholly owned subsidiary, Sasan Power Ltd, and bank balances of Rs 6.16 crore. The order was issued under Section 37A(1) of the Foreign Exchange Management Act (FEMA), 1999.

The company said the order relates to foreign currency convertible bonds (FCCBs) issued in 2006 and an overseas investment made in 2008 in a subsidiary in Singapore. Reliance Power stated that the transactions were undertaken with all applicable approvals and that it disputes the allegations of a contravention of Section 4 of FEMA.

Reliance Power shares declined 1.54 per cent to hit a low of Rs 19.74 apiece over their previous closing price of Rs 20.05 per share. The stock had opened at Rs 19.85 and touched a high of Rs 20.05 so far.

Reliance Power said the seizure is provisional and subject to confirmation by the competent authority under Section 37A of FEMA. The company is assessing the financial implications of the order. It also clarified that no penalty has been imposed as part of the action.

In its filing, the company said, "The company shall take all appropriate steps to safeguard its interest as well as the interests of all its shareholders and other stakeholders, as may be legally advised."

According to the company's regulatory filing dated October 13, the seized shares of Sasan Power were already pledged in favour of Power Finance Corporation Ltd, a Government of India undertaking, under security arrangements that have been in place for more than 10 years. The ED order restrains the company from transferring, selling, pledging, encumbering or otherwise dealing with the seized assets.