Anil Ambani, head of the Anil Dhirubhai Ambani Group (ADAG), along with 24 of its affiliated organizations, has been levied with a fine amounting to Rs 624 Crore by the Securities and Exchange Board of India (SEBI). A widespread investigation was launched by SEBI from which this decision resulted, which revealed that loans were being moved from Reliance Home Finance Limited (RHFL), an important company under ADAG. Besides the payment of money penalty, SEBI ordered that Ambani and other mentioned parties remain out of business for five years.
An irregular scheme was revealed in SEBI’s investigation regarding the misuse of general-purpose working capital loans (GPC). During the financial years 2016-17 to 2018-19, these loans funnelled large amounts of cash into different organizations connected with the ADAG Group. The investigation report, which was a total of 222 pages long, showed that RHFL granted more GPC loans in a short time; they rose from Rs 900 crore in FY18 to Rs 7900 crore in FY19 without observing required lending standards.
Three former top executives of RHFL—Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah—were also implicated in the scheme. SEBI found that these key managerial personnel played critical roles in the operation, leading to their prohibition from associating with any listed company for five years. SEBI attributed the fraudulent activities to Anil Ambani, identified as the mastermind behind the scheme based on a preponderance of probability.
The investigation drew from findings by PwC, the former statutory auditor of RHFL, and Grant Thornton, a forensic auditor appointed by the Bank of Baroda, the lead bank of RHFL’s lending consortium. PwC’s review revealed that many of the borrowers who received GPC loans had minimal or no revenue, negative or limited net worth, and were often established just before the loan disbursements. Additionally, some of these borrower companies shared email domains or registered addresses linked to the ADAG Group, raising red flags about their legitimacy.
Grant Thornton’s forensic audit reported that out of the Rs 14,578 crore disbursed by RHFL as GPC loans, approximately Rs 12,488 crore went to 47 entities suspected of being connected to the ADAG Group. These funds were frequently recycled within the group, contributing to the ever-greening of loans. SEBI’s report also noted that the end-use of loans amounting to Rs 1,935 crore could not be traced due to insufficient information.
This regulatory action by SEBI follows interim directions issued on February 11, 2022, and marks the culmination of its probe into the case. While SEBI is currently working to quantify the illegal gains from this operation, the order mandates that Ambani and the involved entities pay the penalty within 45 days. Further legal actions are expected as SEBI continues to address the financial misconduct uncovered in this investigation.
