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The repercussions of the Securities and Exchange Board of India's (SEBI) ban on Anil Ambani and 24 others from the securities market for five years continue to ripple through the market. The decision, stemming from allegations of fund diversion from Reliance Home Finance Ltd (RHFL), has sent shockwaves through the group's stock prices. On Monday, August 26, 2024, shares of Anil Ambani-led group firms – Reliance Home Finance Ltd, Reliance Power, and Reliance Communications – plummeted to their lower circuit limits, reflecting investor anxieties in the wake of the SEBI action.
Reliance Power's stock took a significant hit, dropping 4.99% to reach the lower circuit limit of Rs 32.73 on the BSE. Reliance Home Finance Ltd saw an even more dramatic decline, tumbling 4.93% to Rs 4.24, the day's lowest permissible trading limit. Reliance Communications also suffered, diving 4.92% to touch the lower circuit of Rs 2.32. Even Reliance Infrastructure, while less affected, still saw a decline of 2.90% to Rs 205.55.
The SEBI's investigation, launched after receiving multiple complaints concerning fund diversion from RHFL, uncovered a fraudulent scheme orchestrated by Ambani, along with key managerial personnel (KMPs) from RHFL, including Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah. This scheme involved disguising funds siphoned from RHFL as loans to entities linked to Ambani. While the board of directors of RHFL had issued directives to stop such lending practices and review corporate loans regularly, the company's management disregarded these orders.
The investigation revealed that the company's management and promoter had approved loans worth hundreds of crores to companies with little to no assets, cash flow, net worth, or revenue. This pattern, coupled with the close connections between these borrowers and RHFL's promoters, raises serious concerns about the true intentions behind these 'loans'. The ultimate outcome was a failure by most of these borrowers to repay their loans, resulting in RHFL's default on its own debt obligations and subsequent resolution under the RBI Framework. This unfortunate scenario has left public shareholders of RHFL in a challenging position.