Industrialist Anil Ambani of Reliance Home Finance Ltd (RHFL) and three other individuals have been banned from trading in securities until further orders by the Securities and Exchange Board (SEBI) for allegedly fraudulent activities relating to the company. Pinkesh R Shah is the third individual, along with Amit Bapna and Ravindra Sudhakar.
Until further orders, SEBI has also restrained the individuals from associating with any intermediary registered with SEBI or with any listed company or acting director or promoter of any company that intends to raise money from the public.
A 100-page order has been passed against 28 individuals and entities (noticees) for alleged misappropriation of funds from the company. In its investigation, SEBI focused on how Reliance Home Finance Ltd (RHFL) disbursed loans to several borrowing entities during 2018-19.
SEBI noted that several sources triggered the current proceedings, including Price Waterhouse & Co’s letter to RHFL informing them to resign as the company’s auditor and complaints received by SEBI alleging siphoning off/diversion of funds from RHFL by promoters and management.
Considering the conduct of the chairman, CEO, and CFO of the group in extending gratuitous treatment to the GPCL (general-purpose corporate loan) borrower entities, it would seem that the destination of the funds lent by RHFL was already known to the notice numbers 1 to 5 (RHFL, Anil Ambani, Amit Bapna, Ravindra Sudhakar, and Pinkesh R Shah) when the loan was sanctioned, the SEBI order said in a report by Business Today.
RHFL’s disbursements under General Purpose Corporate Loans (GPC loans) have gone up from roughly Rs 900 crore on March 31, 2018, to approximately Rs 7,900 crore on March 31, 2019, the order said.
SEBI said that noticees (noticee nos. 1 to 28) might further file replies apologizing for any alleged violations of laws such as the SEBI Act, 1992, LODR Regulations, and PFUTP Regulations. The noticees will have 21 days to respond to the notice. Furthermore, they can indicate whether they wish to be heard in person at a specific date and time. As part of its clarification, SEBI said the restraint imposed on RHFL should not interfere with the resolution/revival plan pending or approved under any law.
Anil Ambani’s Downfall
Sixty-six per cent of Anil Ambani’s wealth comes from Reliance Communication. The company chose CDMA (Code Division Multiple Access) when it was established in 2002. At the same time, Anil acquired GLT Infra to expand 3G and found a sister company for an underwater cable network.
Mukesh eventually announced Jio with 4G. RCom’s downfall was due to poor management, its failure to provide 4G, and a price war that followed. To keep the hopes of the capital-intensive company alive, Anil had only one option, which was to take on debt. In 2016, the company was under excessive debt.
In addition, Reliance Home Finance, Reliance Capital, Reliance Infrastructure, and Reliance Power were performing poorly. A recession that swept the nation in 2008 weighed heavily on Reliance Capital. The company eventually exited the mutual fund business by selling its stake in Reliance Nippon Life Asset Management Ltd. (RNAM). Reliance Capital used the proceeds of the Rs 6000 crore investment to reduce its outstanding debt by 33%.
In the meantime, Reliance, Infra, and Power were defaulting on loans, and reliance Home Finance had defaulted on bond payments.