On August 23, 2024, the Securities and Exchange Board of India (SEBI) imposed a five-year ban on Anil Ambani, one of India’s most prominent businessmen, from participating in the securities market. This decision came as a result of serious allegations of fund diversion involving Reliance Home Finance Limited (RHFL), a company under the Reliance Anil Dhirubhai Ambani Group (ADAG).

The Allegations and SEBI’s Findings

The core of the controversy lies in the alleged diversion of funds from RHFL. SEBI’s investigation revealed that RHFL disbursed a series of large general-purpose working capital (GPC) loans to entities with extremely weak financials. These borrowers had negative or negligible net worth, profits, assets, cash flows, and businesses. Despite these red flags, loans amounting to thousands of crores were approved and disbursed without adequate collateral or security.

SEBI’s detailed 222-page order highlighted that during the financial year 2018-19, RHFL disbursed 97 GPC loans amounting to ₹8,470.65 crore to 45 borrower entities. An analysis of 70 loan applications for GPC loans worth ₹6,187 crore showed that 62 applications were approved on the same date, and in 27 cases, the loan was disbursed on the date of application.

Even after the RHFL board explicitly instructed the company to stop disbursing GPC loans on February 11, 2019, the practice continued with the approval of Anil Ambani in his capacity as Group Head. SEBI found that Ambani approved 14 loan applications involving ₹1,472.16 crore during a period of just over 1.5 months.

The Penalties

In addition to the five-year ban, SEBI imposed a ₹25 crore fine on Anil Ambani. The total penalty on Ambani and the other 24 entities involved in the scheme amounts to more than ₹625 crore. SEBI’s order also restrains Ambani from holding key managerial or directorial roles in any listed company or market intermediary for five years.

Anil Ambani’s Financial Struggles

Once ranked as the sixth-richest person in the world in 2008, Anil Ambani’s financial fortunes have dramatically declined over the years. In 2020, he declared bankruptcy in a UK court, stating that his net worth was zero. As of 2023, reports indicated that his net worth was around ₹250 crore (approximately $29.9 million). However, more recent estimates suggest that his net worth has risen to ₹8,349 crore.

Conclusion

The SEBI ban marks a significant chapter in Anil Ambani’s tumultuous financial journey. The allegations of fund diversion and the subsequent penalties underscore the importance of stringent regulatory oversight in maintaining the integrity of the financial markets. As Ambani navigates these challenges, the impact on his business empire and personal fortunes will be closely watched.