The Securities and Exchange Board of India (SEBI) has taken action against Anil Ambani and 24 others entities, including Reliance Home Finance Limited (RHFL), and bans from security market for their involvement in the diversion of funds from company. SEBI banned this entities and Anil Ambani from market security for five years and also fined Rs.25 Crore.
SEBI identified that Anil Ambani, as the chairman of the ADA Group and a significant promoter of RHFL’s holding company, played a crucial role in orchestrating a scheme to siphon off funds from RHFL. This fraud caused significant losses for shareholders.
The RHFL has also barred from the security market for six months and fined Rs 6 Lakh.
Why did SEBI ordered bans against Anil Ambani?
SEBI’s 222-page final order revealed that Anil Ambani, with the help of RHFL’s top managers, created a fraudulent scheme to take money from RHFL by pretending it was loans to companies linked to him.
Although the RHFL Board of Directors ordered a stop to these lending practices and regularly reviewed corporate loans, the company’s management ignored these orders. SEBI pointed out that this shows a major failure in governance, influenced by certain key managers under Anil Ambani’s control.
Sebi said, “existence of a fraudulent scheme, orchestrated by Noticee No. 2 (Anil Ambani) and administered by the KMPs of RHFL, to siphon off funds from the public listed company (RHFL) by structuring them as ‘loans’ to credit unworthy conduit borrowers, and in turn, to onward borrowers, all of whom have been found to be ‘promoter linked entities’ i.e. entities associated/ linked with Noticee 2 (Anil Ambani)”.
The Financial fraud
Between FY18 and FY19, Reliance Home Finance Ltd. (RHFL) approved and disbursed massive Guaranteed Payment Credit (GPC) loans amounting to thousands of crores to financially unstable entities with negative net worth and negligible assets. These loans were granted without any recorded collateral or security.
RHFL’s management repeatedly ignored standard credit due diligence, bypassing internal credit ratings and default probability assessments. Despite clear financial weaknesses of the borrowers, risky loans were processed unchecked.
On February 11, 2019, RHFL’s Board ordered an end to GPC loan disbursements. However, the company continued issuing these loans, including those authorized by Anil Ambani, the group head, showing severe internal control failures.
Investigations revealed that the GPC loan borrowers and fund recipients were linked to the promoter group. Post-facto guarantees from these promoter-linked companies confirmed these connections. The Statutory Auditor, PWC, raised concerns about the quality and recoverability of the loans but resigned in June 2019.
The other 24 entities banned by SEBI with Anil Ambani
Sebi also ban other 24 entities which include Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah. Sebi has fined ₹27 crore on Amit Bapna, ₹26 crore on Ravindra Sudhalkar, and ₹21 crore on Pinkesh Shah. Additionally, Sebi also fined Rs.25 Crore to each entities who linked to the fraudulent scheme.
Furthermore, the remaining entities, including Reliance Unicorn Enterprises, Reliance Exchange next Lt, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd, and Reliance.
