Why Did Sebi Ban Anil Ambani From Securities Market For 5 Years?
The order by the market regulator reads that Anil Ambani used his position to siphon off the company’s funds, in collaboration with the key managerial officials
The Securities and Exchange Board of India (Sebi) has banned the former chairman of Reliance Home Finance (RHFL), Anil Ambani and 24 other entities from the securities market for five years after its investigations regarding the fund diversion allegations from RHFL. The regulatory body has imposed a penalty of Rs 25 crore on the industrialist.
The people barred by the body include some of the key former officials of the RHFL, who have also been fined. The debarment period for RHFL is six months. The Sebi’s decision comes after Anil Ambani and other officials were found to have staged a fraudulent scheme to misappropriate the company’s funds.
Why Did Sebi Ban Anil Ambani?
Anil Ambani, who is the chairperson of the ADA group and the former chairperson of the RHFL used his position to siphon off the company’s funds. In collaboration with the key managerial officials (KMPs), Ambani misappropriated the funds which were disguised as loans and were extended to a few entities, which were related to the promoters of RHFL itself.
The order stated, “While Noticee Number 2 (Anil Ambani) was not a director in RHFL, he has used his position as ‘Chairperson of the ADA group’ and his significant indirect shareholding in the holding company of RHFL to orchestrate the fraud thereby not just adversely affecting RHFL’s stakeholders but also the confidence in the integrity of governance structures in regulated financial sector entities.”
“Total Loans disbursed by RHFL to 45 general Purpose Working Capital Loans (GPCL) Entities were Rs 9,295.25 crore, which includes Rs 824.60 crore towards unaccounted disbursal by RHFL,” the order read.
Borrowers Shared Common Locations
Sebi noted that the borrowers to whom the ‘loans’ were sanctioned were often financially unviable and did not have sufficient revenue or assets They were even located at eight common locations in Mumbai. These prompted the Sebi to conduct a thorough investigation.
“Out of the 45 GPCL borrower entities, 41 entities share common addresses with at least one of such other borrower entities. In fact, all such 41 entities are found to be located at 8 common addresses in Mumbai. Further, as per RHFL's (lender company) Final Order in the matter of Reliance Home Finance, some of the entities share common email addresses,” Sebi’s order stated.
The market regulator also noted that the total amount extended as GPCL to these 41 entities was around Rs 7,822.90 Crore (92.35 per cent of the total amount of GPCL of Rs 8470.65 Crore).
“Many of the entities to whom funds were onward transferred or advanced by GPCL borrower companies of RHFL were found to be entities related to promoters of RHFL itself,” the regulatory body noted regarding the sanctions.
Ambani Ignored RHFL Board’s Decision
In its order, Sebi noted that the board of directors of RHFL had decided against further lending to the corporates that do not fall under the policy criteria of the Company, but Anil Ambani continued to indulge in such activities.
The order read, “However, even after such an explicit direction of the Board of Directors that excluded any further GPCL lending, an amount of Rs 2276.52 crore was further disbursed by RHFL towards 24 different GPC Loan applications which did not pertain to home loans or had construction-related lending, until March 31, 2019.”
“certain loans (14 cases) amounting to Rs 1472.16 Crore were found to have been approved after February 11, 2019, by Noticee no. 2 in the capacity of Chairman of Reliance ADA Group,” Sebi noted.
Highlighting that the RHFL defaulted in its payment towards its lenders, Sebi noted, “Subsequently, most of the GPCL borrowers’ accounts turned NPAs and as a consequence of the same, RHFL defaulted in its payment obligations towards its lenders which culminated in its Resolution under RBI Framework.”
Who Is Anil Ambani?
Ranked as the sixth richest person in the world in 2008, Anil Ambani is the younger son of Dhirubhai Ambani and the brother of Mukesh Amban. He began his journey in 2002 when the Reliance group split up after the death of his father. He inherited the group’s telecom, entertainment, and infrastructure segments.
Reliance Communications (RCom) was driven into insolvency proceedings in 2019. He has been facing financial challenges for quite some now and Sebi’s decision to ban him from the securities market has now handed him a massive blow.
