SEBI bans Anil Ambani, 24 others from securities market for 5 years.

The Securities and Exchange Board of India (SEBI) has banned industrialist Anil Ambani and 24 others, including former senior executives of Reliance Home Finance, from the securities market for five years. This is due to their involvement in misusing company funds.

SEBI found a major financial fraud at Reliance Home Finance Ltd. (RHFL). Led by Anil Ambani and other key figures, the scheme involved taking large amounts of money from the company through questionable loans, causing big losses for shareholders.

Loans given without collateral

Between FY18 and FY19, RHFL approved and gave out large Guaranteed Payment Credit (GPC) loans worth thousands of crores. These loans were given to entities with very weak financial profiles, including negative net worth and very few assets. Shockingly, these loans were given without any recorded collateral or security.

RHFL’s management often ignored standard credit checks. Despite the borrowers’ obvious financial weaknesses, internal credit ratings were ignored, and the need to assess the risk of default was waived. This lack of scrutiny allowed risky loans to go ahead unchecked.

On February 11, 2019, RHFL’s Board clearly instructed to stop GPC loan disbursements. However, the company continued to issue these loans, including those approved by Anil Ambani as group head. This disregard for board directives shows the serious internal control failures.

It was revealed that the GPC loan borrowers and the entities receiving the funds were linked to the promoter group. Guarantees from promoter-group companies confirmed these connections. The Statutory Auditor PWC raised concerns about the loan quality and recoverability but resigned in June 2019.

Key players fined

SEBI has fined Rs 27 crore on Amit Bapna, Rs 26 crore on Ravindra Sudhalkar, and Rs 21 crore on Pinkesh Shah. Additionally, several entities linked to the fraudulent scheme have been fined Rs 25 crore each. These fines are for their roles in facilitating or benefiting from illegal loan disbursements.

According to SEBI, as Chairman of the ADA Group and a major promoter of RHFL’s holding company, Anil Ambani played a crucial role in organising the fraudulent loans. His influence extended to approving large loan amounts and directing funds to related entities.

Bapna, a former CFO of RHFL and a member of the Credit Committee, was involved in approving the loans despite deviations from standard procedures. He continued to facilitate GPC loan disbursements even after the board’s directive to stop them.

As CEO of RHFL, Sudhalkar was responsible for the approval and management of the loans. SEBI noted that he failed to act on the board’s instructions and neglected to recover funds or enforce guarantees, contributing to the company’s eventual downfall.

Shah, the CFO responsible for financial and accounting functions, certified the company’s financials as accurate despite knowing about the questionable loan practices and the auditor’s concerns.

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