Mumbai: Market regulator SEBI is banned strong chairman Anil AmbaniAnd 24 entities linked to him were banned from the securities market for five years and fined a total of Rs 624 crore for diversion of funds from his group company. Reliance Home FinanceAmbani, Amit Bapna, Ravindra Sudhakar and Pinkesh R Shah (all former top executives of RHFL) have also been barred from being associated with any listed entity for five years.
“It is highly likely that the mastermind behind this fraud scheme is Anil Ambani, Chairman of ADAG. It is also evident that the company's KMPs (key managerial personnel) Bapna, Sudhakar and Shah played an active role in executing this fraud scheme,” Sebi said.
Sebi's 222-page investigation report detailed how Ambani and three former executives lent huge loans to various entities linked to the Anil D. Ambani Group (ADAG) that were never repaid.
Regulatory action in the matter has been completed with Sebi's investigation following interim directions issued on February 11, 2022. The report also incorporates observations from PwC (former statutory auditor of RHFL) and Grant Thornton (forensic auditor appointed by Bank of Baroda, the lead bank of the consortium of lenders to RHFL).
Earlier this year, the National Financial Regulatory Authority, the regulator of auditors and audit firms of large, listed companies, had barred and imposed fines on chartered accountants of two companies linked to Reliance Capital, citing how funds were misappropriated and auditors failed to discharge their responsibilities.
SEBI's investigation into RHFL's affairs was primarily for the company's operations during the years 2016-17 to 2018-19. The regulator's report also incorporated observations from PwC (former statutory auditor of RHFL) and Grant Thornton (forensic auditor appointed by Bank of Baroda, the lead bank of RHFL's consortium of lenders).
Ambani and his associates had used a loan product called general purpose working capital loans (GPC loans) to advance funds to multiple entities without following proper lending norms. Between FY18 and FY19, GPC loans by RHFL had increased nearly 9 times: from Rs 900 crore to Rs 7,900 crore, Sebi said, citing PwC's letter to RHFL management.
The PwC letter also mentioned that many of these borrowers had limited or no revenue, negative or limited net worth, no business other than lending loans from RHFL, etc. The letter also pointed out that some of these borrowers were incorporated only shortly before RHFL disbursed the loans and “in some cases, the dates of loan sanction were found to be the same as the date of application for loan or even earlier than the dates of application made by these borrowers”.
PwC had also pointed out to RHFL's management that some borrowers had email domain addresses of Reliance ADA Group, the brand name “Reliance” appeared in the name of the borrower company, the directors of such companies were employees of Reliance ADA Group, and many borrower companies had the same registered address. The auditor asked why these companies should not be classified as group companies.
Soon after, PwC resigned as statutory auditor of RHFL, and informed its decision to the Ministry of Corporate Affairs and also to SEBI.
In its forensic audit report, Grant Thornton had pointed out that RHFL had disbursed about Rs 14,578 crore to various entities in the form of GPC loans, of which about Rs 12,488 crore was given to 47 entities suspected to be linked to the ADAG group. Over time, some of these loans came back to these related entities, often used to evade the loan forever. Several group companies were involved in these operations, including Reliance Capital (RHFL's holding company), Reliance Commercial Finance, Reliance Infrastructure, Reliance Big Entertainment, Reliance Broadcast Network and others.
The Sebi report said forensic auditors could not ascertain the end use of loans worth about Rs 1,935 crore “due to information limitations”. The order said the regulator is in the process of determining the amount of illegal gains from this fraudulent operation and “action may be initiated in accordance with law”. Ambani and 24 associated entities have 45 days to pay the fine.
“It is highly likely that the mastermind behind this fraud scheme is Anil Ambani, Chairman of ADAG. It is also evident that the company's KMPs (key managerial personnel) Bapna, Sudhakar and Shah played an active role in executing this fraud scheme,” Sebi said.
Sebi's 222-page investigation report detailed how Ambani and three former executives lent huge loans to various entities linked to the Anil D. Ambani Group (ADAG) that were never repaid.
Regulatory action in the matter has been completed with Sebi's investigation following interim directions issued on February 11, 2022. The report also incorporates observations from PwC (former statutory auditor of RHFL) and Grant Thornton (forensic auditor appointed by Bank of Baroda, the lead bank of the consortium of lenders to RHFL).
Earlier this year, the National Financial Regulatory Authority, the regulator of auditors and audit firms of large, listed companies, had barred and imposed fines on chartered accountants of two companies linked to Reliance Capital, citing how funds were misappropriated and auditors failed to discharge their responsibilities.
SEBI's investigation into RHFL's affairs was primarily for the company's operations during the years 2016-17 to 2018-19. The regulator's report also incorporated observations from PwC (former statutory auditor of RHFL) and Grant Thornton (forensic auditor appointed by Bank of Baroda, the lead bank of RHFL's consortium of lenders).
Ambani and his associates had used a loan product called general purpose working capital loans (GPC loans) to advance funds to multiple entities without following proper lending norms. Between FY18 and FY19, GPC loans by RHFL had increased nearly 9 times: from Rs 900 crore to Rs 7,900 crore, Sebi said, citing PwC's letter to RHFL management.
The PwC letter also mentioned that many of these borrowers had limited or no revenue, negative or limited net worth, no business other than lending loans from RHFL, etc. The letter also pointed out that some of these borrowers were incorporated only shortly before RHFL disbursed the loans and “in some cases, the dates of loan sanction were found to be the same as the date of application for loan or even earlier than the dates of application made by these borrowers”.
PwC had also pointed out to RHFL's management that some borrowers had email domain addresses of Reliance ADA Group, the brand name “Reliance” appeared in the name of the borrower company, the directors of such companies were employees of Reliance ADA Group, and many borrower companies had the same registered address. The auditor asked why these companies should not be classified as group companies.
Soon after, PwC resigned as statutory auditor of RHFL, and informed its decision to the Ministry of Corporate Affairs and also to SEBI.
In its forensic audit report, Grant Thornton had pointed out that RHFL had disbursed about Rs 14,578 crore to various entities in the form of GPC loans, of which about Rs 12,488 crore was given to 47 entities suspected to be linked to the ADAG group. Over time, some of these loans came back to these related entities, often used to evade the loan forever. Several group companies were involved in these operations, including Reliance Capital (RHFL's holding company), Reliance Commercial Finance, Reliance Infrastructure, Reliance Big Entertainment, Reliance Broadcast Network and others.
The Sebi report said forensic auditors could not ascertain the end use of loans worth about Rs 1,935 crore “due to information limitations”. The order said the regulator is in the process of determining the amount of illegal gains from this fraudulent operation and “action may be initiated in accordance with law”. Ambani and 24 associated entities have 45 days to pay the fine.