Anil Ambani, the industrialist who once declared himself bankrupt before a UK Court in February 2020, is now facing further repercussions as the markets regulator, Sebi, has barred him from the securities market for five years. This decision comes after Sebi found evidence of Ambani orchestrating a fraudulent scheme to siphon off funds from Reliance Home Finance, a company under the Anil Dhirubhai Ambani Group.
The regulator has imposed a hefty penalty of Rs 25 crore on Ambani and has also restrained him from being associated with the securities market in any capacity, including as a director or Key Managerial Personnel (KMP) in any listed company or intermediary registered with Sebi, for a period of five years. Following this news, shares of Anil Ambani Group companies such as Reliance Power, Reliance Home Finance, and Reliance Infrastructure fell by up to 14%.
Sebi’s investigation into multiple complaints of funds diversion in Reliance Home Finance during FY 2018-19 revealed that Anil Ambani was the mastermind behind the fraudulent scheme. The regulator stated that the case exposed a complete breakdown of governance in a large listed company, apparently orchestrated by the promoter and aided by the company’s Key Managerial Personnel. The company’s management was found to have defied the concerns raised by its own board regarding GPCL lending.
In its 222-page final order, Sebi also barred 24 other entities, including former key officials of Reliance Home Finance, from the securities market for five years. Additionally, RHFL has been barred from the securities market for six months and has been directed to pay a fine of Rs 6 lakh. The former key officials of RHFL, including Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, have been levied fines ranging from Rs 21 crore to Rs 27 crore.
The investigation concluded that key managerial personnel of RHFL, including Anil Ambani, siphoned off funds from the company by structuring them as loans to credit-unworthy conduit borrowers, who in turn lent the funds to promoter-linked entities. Sebi noted that Ambani played a significant role in orchestrating the fraudulent scheme, using his position as the chairperson of the ADA group and his indirect shareholding in the holding company of RHFL.
The regulator highlighted the cavalier approach of the company’s management and promoter in approving loans worth hundreds of crores to companies with little to no assets, cash flow, net worth, or revenue. Many of these borrowers were closely linked to the promoters of RHFL, and most of them failed to repay their loans, leading to RHFL defaulting on its debt obligations and eventually undergoing resolution under the RBI Framework.
The shareholders of RHFL have suffered significant losses as a result of the fraud, with the company’s share price plummeting from Rs 59.60 in March 2018 to just Rs 0.75 in March 2020. Over 9 lakh shareholders remain invested in RHFL, facing the consequences of the fraudulent activities orchestrated by Anil Ambani and other key officials of the company.
In conclusion, Sebi’s decision to bar Anil Ambani from the securities market for five years and impose a hefty penalty on him sheds light on the fraudulent activities that took place within Reliance Home Finance. The case serves as a stark reminder of the importance of governance and transparency in listed companies, and the consequences that promoters and key officials may face for engaging in fraudulent schemes that harm shareholders and the market as a whole.