That is the question raised by new evidence on the sequence of share issues by Reliance Communications [Get Quote] Infrastructure Ltd, which holds a 77 per cent stake in Reliance Infocomm. Infocomm is one of the largest private telephone companies in the country.

One lot of RCIL shares was sold in February 2002 at par value, of a rupee per share. The total capital (and also the valuation) then was Rs 182 crore (Rs 1.82 billion).

These were subscribed to by both Reliance Industries [Get Quote] and by a web of companies now linked to Reliance Industries chairman and managing director Mukesh Ambani and his wife Nita, and by two trusts.

A year later, in March 2003, fresh shares with face value of Rs 18 crore (Rs 180 million) were sold to Reliance Industries and four other firms that have the same address as Reliance Industries, at Rs 250 per share --- valuing Infocomm now at Rs 50,000 crore (Rs 500 billion).

The first set of private investment companies that are linked to Mukesh Ambani did not pick up any shares at this new, much higher price, nor did the trusts.

In 2002, at the time of the first share issue, Reliance Infocomm was at the project stage. The company had just got into operation in March 2003, when the second issue took place.

The result of the two transactions is that Reliance Industries paid Rs 2,331 crore (Rs 23.31 billion) for a 45 per cent stake in RCIL. Another 4.5 per cent was bought for Rs 2,250 crore (Rs 22.50 billion) by the four investment companies that have the same address as Reliance Industries.

In contrast, the investment companies now linked to Mukesh and Nita Ambani paid Rs 81 crore (Rs 810 million) for a 40.5 per cent stake in the same company. The trusts retain 10 per cent of the company for Rs 20 crore (Rs 200 million).

RCIL now holds a 77 per cent stake in Reliance Infocomm, after Mukesh Ambani gave up his 12 per cent sweat equity in the company after paying Rs 50 crore (Rs 500 million), following controversy over the deal.

One of the issues that has figured in the public spat between Mukesh Ambani and his brother Anil Ambani (vice-chairman and managing director, Reliance Industries) is whether the terms of Reliance Industries' investments are fair to Reliance Industries and its shareholders.

A Reliance Infocomm official, when contacted, said no immediate comment was possible on these issues.

Little was known about the first set of investment companies. However, evidence has come to light directly linking Mukesh and Nita Ambani to the companies that bought shares in RCIL in the first round of issues.

The details are that Mukesh and Nita Ambani have stakes in two private companies, Lira Tradecom and Vivid Mercantile.

These hold stakes in nine private companies that have a shareholding in RCIL, the parent company of Reliance Infocomm.

On March 23, 2004, 990,000 shares in Vivid Mercantile and an equal number of shares in Lira Tradecom were allotted to Mukesh Ambani and wife Nita at par value (Rs 10 a share).

Till then, Vivid Mercantile and Lira Tradecom had a paid-up capital of Rs 1 lakh. So on March 23, they acquired a 99 per cent holding in Vivid Mercantile and in Lira Tradecom.

Both companies have a web of crossholdings in nine private companies  Warburg Capital, Perigree Trading, Greenwich Capital, Twin Roses Trades & Agencies, Reliance Link (later renamed Jewel Communications), Colonial Capital, Equity Link Trading (India), Newton Capital and Reme Trading (apart holdings in two others, Stallion Commercial and Imperial Mercantile).

These are the nine private companies that in February 2002 paid Rs 81 crore for a 44.5 per cent stake at Re 1 per share. Two trusts (Ganesh Infrastructure Capital Fund, Shankar Infrastructure Capital Fund) paid Rs 20 crore (Rs 200 million) for 11 per cent of RCIL's equity at the same price of Re 1 per share. Reliance Industries too acquired a 44.5 per cent stake in RCIL in 2002 for Rs 81 crore, or Re 1 per share.

Between 2002 and March 31, 2003, RCIL raised its paid-up capital from Rs 182 crore to Rs 200 crore (Rs 2 billion) and issued an additional 180 million shares, 90 million of them to Reliance Industries for Rs 2,250 crore (including a premium of Rs 249 per share) and 90 million of them to the other four companies (Reliance Netcentre.com PL, Reliance Webbiz.com PL., Reliance Qualnet.com and Reliance Web Spiders.com PL) for a similar Rs 2,250 crore (including the premium).

No additional shares were issued to the nine original investment companies and two trusts.

The addresses of most of the nine companies are listed not as the Reliance office in Maker Chambers IV in Mumbai but as the adjoining Maker Chambers III.

The address of the two trusts is listed as 84-A Mittal Court, the address of the maze of investment companies that control Reliance Industries. The address of the four other companies is listed as Maker Chambers IV, that is the same as the Reliance Industries office.

These transactions are separate from the optionally convertible preference shares, worth Rs 8,100 crore (Rs 81 billion), that Reliance Industries has invested in the Infocomm project at a premium of Rs 50 per share of Re 1.

A Reliance Infocomm spokesman said that he was unable to offer any comments at the time of going to press.