SEBI Barred Anil Ambani and 24 Other Entities From the Securities Market

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 decision follows findings that they were involved in diverting funds from RHFL. Sebi has also levied a penalty of ₹25 crore on Ambani and barred him from holding any directorial or Key Managerial Personnel (KMP) positions in listed companies or intermediaries registered with the regulator for five years.

RHFL has been suspended from the securities market for six months and fined ₹6 lakh.

Sebi’s investigation revealed that Ambani, with the assistance of RHFL’s key managerial personnel, orchestrated a scheme to siphon funds from the company by disguising them as loans to entities linked to him. Despite strong directives from RHFL’s Board of Directors to halt such practices, the management ignored these orders, highlighting a severe governance failure influenced by Ambani.

Sebi found that while RHFL should not bear equal responsibility for the fraud as the individuals involved, other entities acted as either recipients of the illicit funds or intermediaries facilitating the diversion. The regulator’s findings established that Ambani and RHFL’s KMPs structured loans to credit-unworthy borrowers, many of whom were promoter-linked entities.

Ambani orchestrated the fraud using his position and significant indirect shareholding in RHFL’s holding company. Sebi noted a careless approach by the company’s management and promoter in approving large loans to companies with minimal financial stability, suggesting a malicious intent behind these loans. Many borrowers defaulted, leading RHFL to default on its own debt obligations and eventually undergo a resolution under the RBI Framework, severely impacting its public shareholders.

In March 2018, RHFL’s share price was approximately ₹59.60. By March 2020, after the fraud’s exposure and the company’s depletion of resources, the share price had plummeted to ₹0.75, leaving over 900,000 shareholders with significant losses.

The 24 restrained entities include former RHFL officials Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, who have been fined ₹27 crore, ₹26 crore, and ₹21 crore, respectively, for their roles. Other entities, such as Reliance Unicorn Enterprises and Reliance Exchange Ltd, have been fined ₹25 crore each for either receiving illicit loans or facilitating the diversion of funds.

In February 2022, Sebi issued an interim order restraining Ambani, RHFL, and the individuals mentioned earlier from the securities market, pending further orders related to the alleged fund diversion.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.