SEBI bans Anil Ambani, 24 others from security market for five years

Indian market regulator, SEBI has imposed a five-year ban on industrialist Anil Ambani and 24 other entities, including former senior executives of Reliance Home Finance, from participating in the securities market. This action is a result of their involvement in the misdirection of company funds.

Indian market regulator, SEBI has imposed a five-year ban on industrialist Anil Ambani and 24 other entities. (Photo: Arvind Yadav)

Indian markets regulator, the Securities and Exchange Board of India (Sebi), has imposed a five-year ban on industrialist Anil Ambani and 24 others, including top executives of Reliance Home Finance Ltd. (RHFL), from participating in the securities market. This action follows a probe into RHFL, where funds were allegedly diverted through questionable loans, leading to significant losses and raising concerns among investors.

In addition to the ban, Sebi has imposed a penalty of ₹25 crore on Ambani and barred him from holding any directorial or key managerial positions in listed companies or any intermediaries registered with the regulator for five years.

Reliance Home Finance has also been barred from the securities market for six months and fined ₹600,000.

Sebi’s probe uncovered instances of financial mismanagement at RHFL, where Ambani and key executives were found to have channelled funds through Guaranteed Payment Credit (GPC) loans. These loans were extended to entities with weak financial profiles—entities that, under normal circumstances, would not have qualified for such substantial financial support.

Unprecedented loan disbursements to unworthy entities

Sebi noted that during FY18 and FY19, RHFL disbursed thousands of crores in GPC loans to entities with negative net worth and minimal assets. These loans were issued without any collateral or security, representing a significant deviation from standard credit due diligence.

RHFL’s management ignored internal credit ratings and waived the requirement for assessing the probability of default, allowing these risky loans to proceed unchecked. Despite a board directive on February 11, 2019, to halt GPC loan disbursements, RHFL, under the leadership of Ambani, continued to issue these loans, further exacerbating the financial irregularities.

According to the findings of the Sebi probe, RHFL’s management consistently deviated from standard credit due diligence, disregarding internal credit ratings and waiving the requirement to assess the probability of default, even when borrowers exhibited clear financial weaknesses. This lack of scrutiny allowed risky loans to be issued without proper oversight.

Despite a direct order from RHFL’s Board on 11 February 2019, to cease GPC loan disbursements, the company continued to issue these loans, including those personally sanctioned by Anil Ambani as group head. This disregard for board directives underscores the significant internal control failures within the company, the regulator highlighted.

Further investigation revealed that the GPC loan borrowers and the entities receiving the funds were connected to the promoter group, with post-facto guarantees from promoter-group companies confirming these links. The Statutory Auditor, PwC, raised concerns about the quality and recoverability of the loans but resigned in June 2019, citing these issues.

Key players fined

Sebi has imposed fines of ₹27 crore on Amit Bapna, ₹26 crore on Ravindra Sudhalkar, and ₹21 crore on Pinkesh Shah–all key officials at RHFL. In addition, several entities associated with the fraudulent scheme have been fined ₹25 crore each. These penalties are a response to their involvement in facilitating or benefiting from the illegal loan disbursements.

Sebi’s findings indicate that Anil Ambani, as chairman of the Anil Dhirubai Ambani Group and a key promoter of RHFL’s holding company, played a pivotal role in orchestrating the fraudulent loans. His influence was instrumental in approving substantial loan amounts and directing funds to related entities.

Source: https://www.livemint.com/market/stock-market-news/sebi-bans-anil-ambani-24-others-including-reliance-home-finance-official-from-security-market-for-five-years-11724393443746.html