Reliance Power shares slumped as much as 5 %, while those of Reliance Infrastructure were also down by the same amount after the Securities and Exchange Board of India took significant regulatory action.
The regulator banned business tycoon Anil Ambani and 24 others, including his company’s former officials, for five years for involvement in a major fund-diversion scheme at Reliance Home Finance Ltd.
SEBI had already investigated and found that Ambani, along with the key managerial personnel of RHFL, was in conspiracy to juggle a scheme of funds diversion from RHFL. These diverted funds were shown as loans extended to Ambani group companies.
The management continued the diversion of funds and lending them to group companies despite repeated warnings from the RHFL board of directors, which raised serious concerns about governance.
The regulatory action also fined Ambani ₹25 crore and prohibited him from any directorial or managerial posts in listed companies or registered intermediaries for the next five years. RHFL was also barred from the securities market for six months and fined ₹6 lakh.
The findings hinted at fraud in loans sanctioned to entities with questionable financial health, most of which were Ambani-group companies. These loans turned bad and finally led to RHFL’s financial distress, which was resolved under the RBI framework.
The Reliance Infrastructure stock dropped 4.93 % to ₹224.10, while that of Reliance Power fell 1.63 % to ₹35.71, immediately after the announcement. The market reaction suggested investors were, at least momentarily, seriously concerned about the potential adverse impact of regulatory actions on these firms’ prospects.
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People May Ask
Why did SEBI ban Anil Ambani and others?
SEBI has prohibited Anil Ambani and 24 other entities from the securities market for five years for the diversion of money from Reliance Home Finance. probe revealed that money belonging to RHFL was siphoned off and shown as loans to entities related to Anil Ambani.
What does SEBI action mean for Anil Ambani?
Anil Ambani has been fined ₹25 crore and barred from acting as a director or key managerial position in any listed company or registered intermediary for five years.
What was the market’s reaction to SEBI orders against Anil Ambani?
Relinace Infrastructure Shares fell by 4.93% to ₹224.10 and Relinace Power witnessed a fall of 1.63% to ₹35.71 on the report of the order.
What has SEBI done against Reliance Home Finance Ltd?
RHFL also remains prohibited in the securities market for six months and is fined ₹6 lakh for malpractice in the fund diversion scheme.
How did RHFL get into the fund diversion scheme?
Default in loans of the pertinent fraudulent nature has caused the RHFL default, after which the firm has been placed under the resolution framework of RBI due to financial distress.
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