SEBI Bans Anil Ambani and 24 Others from Securities Market for 5 Years Over RHFL Loan Scandal

August 23, 2024

New Delhi, India

SEBI

India’s market regulator, the Securities and Exchange Board of India (SEBI), has imposed a five-year ban on industrialist Anil Ambani and 24 other entities, including key executives of Reliance Home Finance Ltd. (RHFL), from participating in the securities market. This decisive action follows SEBI’s investigation into the diversion of RHFL funds through questionable loans, which led to significant financial mismanagement and raised serious concerns among investors.

SEBI’s Findings and Penalties: SEBI’s probe revealed that Anil Ambani, using his position as the chairperson of the Anil Dhirubhai Ambani Group (ADA Group) and his significant shareholding in RHFL’s holding company, orchestrated a scheme to siphon off funds from RHFL by disguising them as loans to entities linked to him. In light of these findings, SEBI has not only banned Ambani and the other entities from the securities market but also imposed a ₹25 crore penalty on him.

Additionally, RHFL has been barred from the securities market for six months and fined ₹600,000. SEBI has also restrained Ambani from holding any directorial or key managerial positions in listed companies or intermediaries registered with the regulator for five years.

Details of the Fraudulent Scheme: According to SEBI’s findings, during FY18 and FY19, RHFL disbursed thousands of crores in Guaranteed Payment Credit (GPC) loans to entities with negative net worth and minimal assets—entities that, under normal circumstances, would not have qualified for such substantial financial support. These loans were issued without collateral or proper credit due diligence, representing a significant deviation from standard financial practices.

Despite clear directives from RHFL’s Board of Directors to cease such risky lending practices, the company continued to disburse GPC loans, including those personally sanctioned by Ambani as group head. This blatant disregard for internal controls and board directives underscored severe governance failures within the company.

Role of Key Officials: SEBI’s investigation highlighted the role of key RHFL officials in facilitating the fraudulent loan disbursements. Amit Bapna, the former CFO, Ravindra Sudhalkar, the former CEO, and Pinkesh Shah, the CFO responsible for financial and accounting functions, were all found to have played significant roles in approving and managing these questionable loans. These individuals have been fined ₹27 crore, ₹26 crore, and ₹21 crore, respectively, for their involvement in the scheme.

Auditor Concerns and Resignations: The statutory auditor, PwC, raised concerns about the quality and recoverability of the loans, which eventually led to their resignation in June 2019. PwC cited these issues as critical factors contributing to their decision to step down, further highlighting the severity of the financial mismanagement within RHFL.