Securities and Exchange Board of India (SEBI) has imposed a five-year ban on industrialist Anil Ambani and 24 other parties from participating in the securities market. This includes former senior executives of Reliance Home Finance as well.
The move comes as a result of their involvement in the misdirection of company funds.
Sebi has imposed a penalty of Rs 25 crore on Ambani and restrained him from being associated with the securities market including as a director or Key Managerial Personnel (KMP) in any listed company, or any intermediary registered with the market regulator, for a period of five years.
The regulator has barred Reliance Home Finance from the securities market for six months and slapped a fine of Rs 6 lakh on it.
Sebi released a 222-page final order, and found that Anil Ambani, with the help of RHFL’s key managerial personnel, had orchestrated a fraudulent scheme to siphon-off funds from Reliance Home Finance Ltd (RHFL) by disguising them as loans to entities linked to him.
Although the Board of Directors of RHFL had issued strong directives to stop such lending practices and reviewed corporate loans regularly, the company’s management ignored these orders.
Notably, between FY18 and FY19, RHFL approved and disbursed large Guaranteed Payment Credit (GPC) loans amounting to thousands of crores.
These loans were given to entities with extremely weak financial profiles, including negative net worth and negligible assets. Alarmingly, these loans were granted without any recorded collateral or security.
RHFL’s management repeatedly deviated from standard credit due diligence. Despite the borrowers’ glaring financial weaknesses, internal credit ratings were ignored, and the requirement to assess the probability of default was waived. This lack of scrutiny allowed risky loans to proceed unchecked.
Further, on February 11, 2019, RHFL’s Board explicitly instructed the cessation of GPC loan disbursements. However, the company continued to issue these loans, including those sanctioned by Anil Ambani in his capacity as group head.
This disregard for board directives highlights the severity of the internal control failures.
Shares of Anil Dhirubhai Ambani Group (ADAG) on Friday fell up to 14 per cent after Sebi restricted industrialist Anil Ambani from the securities market for five years on charges of fund siphoning from Reliance Home Finance.
Shares of penny stock Reliance Home Finance hit the 5 per cent lower circuit to a low of Rs 4.46 on BSE. Similarly, shares of retail favourite Reliance Power, which has almost doubled in the last one year, also fell 5 per cent to Rs 34.45.
Reliance Infrastructure shares fell up to 14 per cent to the day’s low of Rs 202 on BSE. Trading in Reliance Communications, Reliance Capital, and Reliance Naval and Engineering remains suspended.