Reliance Home Finance and Reliance Power Stocks Plummet After SEBI Ban on Anil Ambani
Stocks of Anil Ambani’s companies, including Reliance Home Finance and Reliance Power, took a sharp downturn as the Securities and Exchange Board of India (SEBI) imposed significant restrictions on Ambani and several others, citing fund diversion as the core issue. These penalties not only shook investor confidence but also led to substantial declines in the stock prices of these companies.
Following SEBI's stringent actions, Reliance Home Finance Ltd, Reliance Power, and Reliance Communications experienced sharp drops, each hitting their lower circuit limits on Monday. This decline is a direct result of SEBI’s decision to bar Anil Ambani and 24 other individuals from participating in the securities market for a duration of five years due to charges of fund diversion from Reliance Home Finance Ltd. Specifically, the stock of Reliance Power fell by 4.99%, reaching the lower circuit limit of ₹32.73 on the BSE.
Similarly, Reliance Home Finance Ltd saw its shares plummet by 4.93% to ₹4.24, which was the lowest permissible trading limit for the day. Reliance Communications also suffered, diving 4.92% to touch the lower circuit limit of ₹2.32. Even Reliance Infrastructure was not spared, with its shares declining by 2.90% to settle at ₹205.55. The stocks of these companies had already been under pressure, having slumped on the previous trading day as well.
The situation worsened as SEBI imposed a hefty penalty of ₹25 crore on Anil Ambani and prohibited him from holding any position as a director or Key Managerial Personnel (KMP) in any listed company or SEBI-registered entity for five years. Additionally, a penalty ranging from ₹21 crore to ₹25 crore was levied on 24 other entities involved in the case. SEBI also barred Reliance Home Finance from the securities market for six months and imposed a fine of ₹6 lakh on the company.
The controversy began after SEBI received numerous complaints alleging that funds were being diverted or siphoned off from Reliance Home Finance Ltd. To investigate these serious allegations, SEBI conducted an in-depth investigation covering the financial year 2018-19. The objective was to uncover any regulatory violations related to the diversion of funds.
In the course of its investigation, SEBI uncovered a fraudulent scheme orchestrated by Anil Ambani, with the involvement of key managerial personnel (KMPs) of Reliance Home Finance Ltd, including Amit Bapna, Ravindra Sudhalkar, and Pinkesh R. Shah. The scheme involved disguising the diversion of funds as loans provided to entities that were closely linked to Ambani.
Despite clear directives from the board of directors of Reliance Home Finance Ltd to halt such dubious lending practices and regularly review corporate loans, the management of the company disregarded these instructions. SEBI’s 222-page order, issued on Thursday, highlighted the reckless and negligent approach of the company's management and promoter in approving loans worth hundreds of crores to entities with little or no assets, cash flow, net worth, or revenue.
The suspicious nature of these loans becomes more apparent when considering that many of the borrowing entities were closely associated with the promoters of Reliance Home Finance Ltd. As these borrowers failed to repay their loans, Reliance Home Finance Ltd found itself unable to meet its own debt obligations. This financial collapse ultimately led to the company being placed under the RBI Framework for resolution, leaving its public shareholders in a precarious position.
Source:- The Economic Times
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