The Securities and Exchange Board of India (SEBI) has imposed a five-year ban on industrialist Anil Ambani and 24 other entities, including former key officials of Reliance Home Finance Ltd (RHFL), from participating in the securities market. This action follows the discovery of fund diversion from the company.
In addition to the market ban, SEBI has levied a penalty of Rs 25 crore on Ambani. The regulator has also prohibited him from serving as a director or Key Managerial Personnel (KMP) in any listed company or any intermediary registered with SEBI for the next five years. The total penalties imposed on Ambani and the other 24 entities amount to over Rs 625 crore.
Following the SEBI order, shares of Anil Ambani’s group companies experienced significant declines on the stock exchanges. Reliance Power dropped by 5%, Reliance Infrastructure by 10.4%, and RHFL by 4.90%.
SEBI’s investigation revealed that substantial funds were misappropriated under the leadership of Anil Ambani and other key figures at RHFL. The investigation concluded that these entities were involved in a fraudulent scheme that violated securities laws and undermined investor trust.
The SEBI order, signed by Whole Time Member Ananth Narayan G, stated, “Investigation in the matter has concluded that the Noticees were involved in perpetrating a fraudulent scheme by disbursing general purpose working capital (GPC) loans resulting in erosion of the company’s finances due to such loans eventually being declared NPA.”
According to SEBI, the findings confirmed the existence of a fraudulent scheme orchestrated by Noticee No. 2 (Anil Ambani) and carried out by the KMPs of RHFL. The scheme involved diverting funds from the publicly listed company by structuring them as loans to uncreditworthy borrowers, who were later found to be associated with Ambani.
SEBI’s detailed order outlined the roles of each entity involved in the fund diversion. The investigation revealed that the KMPs of RHFL structured loans to unworthy conduits and onward borrowers closely linked to the promoters, raising serious concerns about the misuse of company funds.
The fraudulent loans, disbursed as general-purpose working capital loans, led to a significant erosion of RHFL’s finances. SEBI noted, “Most of the GPCL borrowers’ accounts turned into NPAs and as a consequence of the same, RHFL defaulted in its payment obligations towards its lenders which has culminated in its Resolution under RBI Framework. As a result, the company’s public shareholders have been left high and dry.”
The order also pointed out that KMPs of the company, identified as Noticees 3 to 5, played active roles in executing the fraudulent scheme. While Anil Ambani was not a director at RHFL, he used his position as Chairperson of the ADA group and his significant indirect shareholding in RHFL’s holding company to orchestrate the fraud, negatively impacting RHFL’s stakeholders and undermining confidence in the governance of regulated financial sector entities.
SEBI further disclosed that as of September 30, 2021, the entire outstanding GPCL lending of INR 6931.31 crore had been classified as NPA. RHFL reported that these loans were secured against tangible and intangible assets. However, SEBI’s investigation revealed that these loans were secured against negligible current assets of borrowers who were connected to the promoter group.