SEBI Bars Anil Ambani, Reliance Home Finance From Securities Markets Until Further Orders
The Securities and Exchange Board of India has barred Anil Ambani, Reliance Home Finance Ltd and three of the company's executives from the securities market until further orders. The interim order by the market regulator has also asked RHFL, Anil Ambani and others to close out open positions in any exchange traded derivatives contract within three months.
Until further orders, the market regulator has barred Ambani and three other officials of RHFL from associating with any intermediary registered with SEBI, any listed public company or acting as director/promoter of any public company which intends to raise money from the public.
The other three executives covered by the SEBI interim order include Amit Bapna; Pinkesh R Shah and Ravindra Sudhalkar.
A spokesperson for the Anil Ambani group declined to comment immediately.
Details Of The Case
The order was passed after a SEBI investigation into general purpose corporate loans extended by RHFL in FY 2018-19. The SEBI order noted that a total of Rs. 9,295.25 crore had been extended as general purpose corporate loans to 45 entities.
The market regulator prima facie found that these funds were transferred from RHFL through such loans to entities which seemed to have acted as conduits for siphoning-off funds to other group entities or promoter related entities.
Reliance Housing Finance Ltd is a subsidiary of Reliance Capital Ltd and Anil Ambani was the promoter for the period of investigation. In November 2021, the Reserve Bank of India has superseded the board of Reliance Capital and referred it for insolvency.
The SEBI order prima facie observed that adequate due-diligence was overlooked during the examination of the loan applications.
...such undue haste and abnormal alacrity is indicative of the fact that RFHL may not have paid due regard to even the basic minimum due diligence process like document verification, credit evaluation, which are essentially expected to be performed for any loan applications received by any Housing Finance Company...SEBI order
In one case, the order noted, the loan was disbursed even before the loan sanction date while there were other instances where the loans were disbursed on the date of the application itself.
The regulator noted that in many instances the borrower entities transferred such loans immediately to other connected entities as loans.
Out of the aforesaid amount so advanced to these potentially connected entities, large amounts are seen to have been directly utilised towards repayment of existing debts of such entities while certain amounts of loan funds have followed a circuitous/circular route to get ploughed back to RHFL itself.SEBI order
The SEBI order also pointed out that in 41 out of the 45 unique general purpose corporate loan borrower, entities shared common addresses confined to only eight different locations in Mumbai.
The loans extended to these 41 entities added up to a total of Rs 7,822.90 crore.
"...the investigation has revealed that many of the borrower entities (which borrowed from RHFL) and the entities to whom monies were lent onward were sharing the same address, contact details, promoter group emails, and were also having common directors," said the order.
Further, the SEBI order prima facie noted that certain general purpose corporate loans were extended by RHFL in contravention of a specific restriction imposed by its own board of directors in February 2019.
Some of these loans were sanctioned by Anil Ambani using his controlling powers without paying heed to the directives of the board, the order said.
The order also went on to note that a total of Rs 6,931.31 crore of the general corporate purpose loans due by Sept. 30, 2021 have already been declared as non performing but the corporate guarantees were not invoked.
This, the regulator noted, strengthens the suspicion that the guarantees were prima facie provided by promoter group companies to give a false sense of assurance that these loans were well secured but were never intended to be exercised.