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Informist, Friday, Aug 23, 2024

 

MUMBAI – The Securities and Exchange Board of India on Thursday imposed a penalty of 250 mln rupees on Anil Ambani and a few other entities for their role in siphoning off funds from Reliance Home Finance, a listed subsidiary of Reliance Capital, in 2018-19 (Apr-Mar). After an interim order passed on Feb 11, 2022, SEBI issued a final order in the matter on Thursday.

 

Ambani was the promoter and director of Reliance Capital. In Thursday's order, SEBI also barred Ambani from accessing the securities market for five years, including dealing in securities, directly or indirectly, and from holding any directorship or key managerial personnel post in any listed company or intermediary.

 

SEBI's final order stated that by preponderance of probability, Ambani was the mastermind behind a fraudulent scheme to siphon off funds from Reliance Home Finance. Funds of the company were siphoned off by structuring them as loans to credit-unworthy conduit borrowers, and in turn, to onward borrowers, all of whom were promoter-linked entities linked with Ambani. The fraudulent scheme was aided and administered by select management officials of the company, and there was also involvement of a few other entities in the scheme.

 

In Thursday's final order, SEBI also imposed penalties of 500,000 rupees on the company, 270 mln rupees on Amit Bapna, who was an executive director and chief financial officer during the period, and 260 mln rupees on then chief executive officer and executive director Ravindra Sudhalkar. It also imposed a penalty of 210 mln rupees on Pinkesh Shah, the chief financial officer at that time.

 

Bapna, Sudhalkar, and Shah, were also barred from the securities market and key managerial positions for five years each.

 

SEBI also imposed a penalty of 250 mln rupees each on 21 entities that were involved as conduit borrower entities or beneficiary entities. These included promoter-linked entities such as Reliance Big Entertainment, and conduit entities such as Citi Securities and Financial Services.

 

In its order, the market regulator said that all the entities involved perpetrated a fraudulent scheme wherein general purpose working capital loans worth around 49.44 bln rupees were disbursed by the company to 13 borrower entities, of which 45.33 bln rupees was onward lent to conduit and promoter-linked entities. SEBI stated that as of Sep 30, 2021, the company's non-performing assets for the 13 borrower entities were 26.47 bln rupees.

 

SEBI said that while credit defaults do not by themselves suggest fraudulent activity, in the case of Reliance Home Finance, the defaults were the "culmination of an elaborate and coordinated design" to move funds from the company to "non-descript and financially weak privately held companies connected with the Reliance ADA group".

 

The fraud resulted in Reliance Home Finance being put under resolution process, as per the Reserve Bank of India's framework for resolution of stressed assets, leaving the company's public shareholders "high and dry", SEBI said. It pointed to the large fall in the company's share price from 59.60 rupees in March 2018 to 0.75 rupees around March 2020, and said that this was a result of the "egregious scheme to hollow out the company by siphoning out significant funds, and as clarity emerged about the extent of the fraud involved".

 

This month, shares of Reliance Home Finance have traded between 3.78 rupees and 4.92 rupees on the National Stock Exchange. The shares were at 4.45 rupees at 1359 IST today, down 5.1%.  End

 

Reported by Rajesh Gajra

Edited by Avishek Dutta

 

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