Why SEBI barred Anil Ambani, 24 others from capital markets

The Securities and Exchange Board of India (SEBI) has barred industrialist Anil Ambani and 24 other entities from capital markets for five years due to fund diversion from Reliance Home Finance Ltd (RHFL)

Anil Ambani has been fined Rs 25 crore and prohibited from holding any position in the securities market, including roles as a director or key managerial personnel in listed companies, for the same duration

SEBI's investigation revealed a fraudulent scheme orchestrated by Anil Ambani and key RHFL executives to siphon off funds by structuring them as loans to credit unworthy entities linked to Ambani

The diverted funds, amounting to Rs 8,800 crore, were given to companies with little to no assets or revenue, including Reliance Capital Ltd, Reliance Commercial Finance Ltd., Reliance Power Ltd., and Reliance Infrastructure Ltd.

Many of these borrowers defaulted on loan repayments, causing RHFL to default on its own debt obligations, negatively impacting public shareholders

Forensic audits by PwC and Grant Thornton, as well as SEBI's investigation, found similar violations and supported the allegations of fund diversion

Despite strong directives from RHFL's board to stop such lending practices, Anil Ambani ignored these orders, indicating a significant governance failure under his influence

The other barred entities include former RHFL officials Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, who were fined Rs 27 crore, Rs 26 crore, and Rs 21 crore, respectively.

Additional penalties of Rs 25 crore each were imposed on Reliance Unicorn Enterprises, Reliance Exchangenext Ltd, and other related entities for either receiving the illegally obtained loans or facilitating the illegal diversion of funds from RHFL

SEBI's 222-page order highlights the orchestrated scheme by Anil Ambani to siphon off funds from RHFL, marking a significant regulatory action against corporate governance failures