Reliance Infrastructure files a strong arbitration claim worth Rs 13,400 crore against Adani Transmission.

Reliance Infrastructure arbitration appeal against Adani Transmission.

When the arbitration appeal involving a tremendous amount of money, Rs. 13,400 crores, filed by Reliance Infrastructure against Adani Group for a contract back in 2017, dominates the news, the stock market and investors are in severe distress.

RELIANCE INFRASTRUCTURE

 Reliance Infrastructure, formerly Reliance Energy Limited, is one of the largest Indian private sector enterprises involved in power distribution and infrastructure business. One of the largest private integrated power utilities in India, Reliance Energy, is a holding of the renowned Reliance Infrastructure’s Mumbai power division and provides electricity to over 3 million mercantile, industrial and residential customers. In the 400 square kilometres of Mumbai suburbs. Additionally, it reported a peak demand of more than 1800 MW and annual revenue of Rs. 7500 crores with efficient currency inflows and outflows.

ADANI TRANSMISSION

Adani Transmission, one of India’s largest private sector electric power transmission companies, is a part of the Adani Group, founded by Gautam Adani. It has a massive aligned matrix of 12200 circuit kilometres under its control, with more than 3200 circuit kilometres under construction. In addition, more than 3800 circuit km configuration going through the Mudra Thermal Power Station to Mundra-Dehgam, Mundra-Mohindergarh, and Tirora-Warora were under the management of the company Adani Transmission at the time of its incorporation.

RELIANCE INFRASTRUCTURE DEAL WITH ADANI TRANSMISSION

In 2007, Reliance Infrastructure signed a bound contract agreement with the Adani group for a 100 per cent stake in its massive Mumbai power business, combining generation, distribution, and transmission for a whopping sum of Rs. 18800 crores.

This agreement resulted in the formation of Adani Mumbai Electricity Limited.

With the agreement’s effect, Adani Group got a foothold in the distribution business, which helped rebuild its company from a generation and transmission company into a fully integrated power utility. As a result, it became India’s one of the biggest private integrated power utilities.

The agreement said that for this amount, Adani Transmission Ltd., the power distribution arm of Adani Enterprises, will pay Rs.13,251 crores at first glance. Then the remaining Rs. 5,500 crores will be delivered to them on a future date with certain conditions. 

Reliance Infrastructure CEO Anil Jalan said that the company would use Rs.15000 crores alone to repay their debts, leaving the remaining Rs. 3000 crores in the form of surplus with them.

IMPACT ON STOCK MARKET

Following the agreement, there was reportedly a rise in 10% of the share price of both companies the following day on the Bombay Stock Exchange (BSE).

In response to the same agreement, on 10 September 2022, the MCIA (Mumbai Centre for International Arbitration) registered an arbitration case from Reliance Infrastructure against Adani Transmission. Reliance quoted a breach in the purchase agreement of December 2017 relating to the transfer of its business to the Adani group. As a result, Reliance Infrastructure filed proceedings against Adani Transmission Corporation for a total of Rs. 13,400 crores.

 The Reliance Group said in a statement, “The financial implication cannot be ascertained and is unanticipated upon the outcome of the arbitration and forthcoming legal challenges” on Friday’s filing on the Stock market.

There is no such comment on this matter from the Adani group.

Although, for the arbitration appeal, Adani Transmission issued its wordings and told them to be “afterthoughts and based on untenable positions.” Additionally, they stated that they would make solid and fair accusations against Reliance Infrastructure on the day of the hearing.

ON STOCK EXCHANGE

The stocks of both these companies saw ups and downs post the arbitration news.

As per the Stock Exchange, the share of Reliance Infrastructure ended at Rs.174.10, up 7.17%, and on the other hand, the stock of Adani Transmission ended at Rs.4005.85, up 1.89% on the BSE. The events undoubtedly impacted the stock holdings of these two businesses.

According to a memorandum appearing on its website, the MCIA, Mumbai Centre for International Arbitration, is the first arbitral institute of its kind in India, resulting from the cumulative work of the legal communities and domestic and international business. With this help, the corporates can now avoid local court proceedings.

edited and proofread by nikita sharma