Sebi Bans Anil Ambani and 24 Others from Securities Market

Sebi Bans Anil Ambani: 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 individuals, including senior executives of Reliance Home Finance Ltd. (RHFL). This ban prevents them from participating in the securities market. The action comes after an investigation into RHFL, which revealed that funds were misused through questionable loans, leading to significant financial losses and investor concerns.

Fines and Restrictions

In addition to the ban, Sebi has fined Anil Ambani Rs. 25 crore. He is also prohibited from holding any directorial or important managerial positions in listed companies or with any intermediaries registered with Sebi for the next five years.

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

Investigation Findings

Sebi’s investigation found serious financial mismanagement at RHFL. It was discovered that Ambani and other top executives had funneled funds through Guaranteed Payment Credit (GPC) loans to entities with poor financial health—entities that normally wouldn’t qualify for such large loans.

Irregular Loan Practices

During fiscal years 2018 and 2019, RHFL issued huge amounts in GPC loans to entities with negative net worth and few assets. These loans were given without any collateral or proper security checks, breaking standard credit procedures.

RHFL's management ignored internal credit ratings and skipped necessary assessments of default risk, allowing these risky loans to go through unchecked. Despite a direct order from the RHFL board on February 11, 2019, to stop issuing GPC loans, the company continued to grant these loans, including some personally approved by Anil Ambani.

Internal Control Failures

Sebi highlighted that the company’s internal controls were seriously flawed. The GPC loan borrowers were linked to the promoter group, with post-facto guarantees from related companies confirming these connections. The statutory auditor, PwC, had raised concerns about the loans’ quality and potential recoverability but resigned in June 2019 due to these issues.

Fines for Executives

Sebi has fined Amit Bapna Rs. 27 crore, Ravindra Sudhalkar Rs. 26 crore, and Pinkesh Shah Rs. 21 crore—key officials at RHFL involved in the loan approval process. Several other entities linked to the fraudulent loans have also been fined Rs. 25 crore each.

Roles and Responsibilities

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

Amit Bapna, the former CFO of RHFL, was instrumental in approving the loans despite deviations from standard procedures and continued to facilitate the loans even after the board’s halt order.

Ravindra Sudhalkar, as the CEO of RHFL, was responsible for overseeing the loans. Sebi noted that he failed to follow board instructions, did not recover the funds, and neglected to enforce guarantees.

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Pinkesh Shah, the CFO responsible for financial and accounting matters, certified the company’s financial reports as accurate despite being aware of the questionable loan practices and auditor concerns.