The Securities and Exchange Board of India (Sebi) has barred Anil Ambani and three associates from the capital market for alleged siphoning of funds from Reliance Home Finance (RHFL). 

The regulator has also restrained them from associating with any listed company, stock market intermediary or any public company that intends to raise money.

The restrictions will remain until further notice, Sebi has said in an interim order directing Ambani and several others ‘show cuase’ as to why further action and investigation shouldn’t be initiated against them.

“Such misconduct on the part of Noticee no. 2 (Anil Ambani) as the chairman of the company/group smacks of fraudulent intent of the top management of the company first, to divert the borrowed funds of the company meant to be advanced to genuine third-party borrowers to the coffers of various promoter group entities under the garb of series of sham GPC (general purpose corporate lending) and then to cover up the losses & NPA arising out of such transactions by concealing actual financial health of the company from the shareholders and general investing public, who could never know the real financial status of RHFL by looking at the cooked up books of accounts presented to them through the stock exchanges,” says the Sebi order.

In a letter dated April 18, 2019, audit firm PWC highlighted certain observations and sought response from the company’s top brass and audit committee. 

The auditor highlighted that the amount of loans disbursed by RHFL under GPC loans have increased exponentially from Rs 900 crore as on March 31, 2018 to around Rs 7,900 crore as on March 31, 2019.

PWC also highlighted that the net-worth of borrowers were negative and they had limited or no revenue and profit.

An investigation revealed that several of these borrowers were group companies of RHFL.

Another forensic audit was conducted by the consortium of lenders of RHFL, led by Bank of Baroda.

The forensic auditor has observed that an amount of Rs 14,577 crore was disbursed by RHFL to numerous entities as GPC loans, of which Rs 12,487 crore was disbursed to 47 potentially indirectly linked entities (PILE).

Another report highlighted that there were 150 loan cases falling under the category of PILEs between FY17 and FY19. Of these, 100 loan cases amounting to Rs 8,884 crore were still outstanding in the books of RHFL.

Sebi also launched its own investigation where it found several irregularities in loan disbursal process and collusion between top officials to siphon off money from RHFL.

“To sum up, all the aforesaid Noticees have played their respective roles in unison duly aided and abetted by other Noticees through a collusive nexus, to translate a preordained scheme into action resulting in siphoning off of huge amounts of funds from RHFL’s accounts, a major portion of which had to be declared NPA soon after their sanctions,” the Sebi order by whole time member SK Mohanty states.