Once ranked the sixth richest person in the world, with a net worth of $42 billion, to declaring bankruptcy, Anil Ambani has seen one of the most dramatic falls in corporate India. The younger son of Dhirubhai Ambani, and brother of Mukesh Ambani, started out to build upon the huge business empire set up by his father. But it seems everything he touches eventually crumbles.

Last week, India’s market regulator banned him from the securities market for five years for allegedly diverting funds. The Securities and Exchange Board of India has also imposed a fine of Rs 25 crore (around $3 million) against the chairman of the Reliance Anil Dhirubhai Ambani Group (ADAG). But the ban is only the latest in a series of setbacks Ambani faces—most businesses under him are already facing bankruptcy proceedings. At a time when Mukesh Ambani-led Reliance Industries is scaling new heights, ADAG is embroiled in financial and legal woes.

So, how did the younger Ambani’s business meet such a different fate?

Anil Ambani builds ADAG: To understand how Ambani got here and the latest SEBI ban, let’s go back two decades. In 2002, Dhirubhai Ambani had a stroke and died without leaving a will. This resulted in a messy separation of the Rs 28,000-crore business empire, culminating in a split in 2005. Mukesh Ambani took control of Reliance Industries’ flagship oil and petrochemicals businesses and his younger brother took over the new-age telecommunications, power generation and financial services divisions. RIL continued to be managed by Mukesh Ambani, while his brother started ADAG.

ADAG had several businesses and companies under it. There was Reliance Capital, a financial services company engaged in insurance, wealth management, commercial and home finance, and more. Then there was Reliance Communications, which offered mobile network services. There was also Reliance Infrastructure, which was involved in power generation and infrastructure, among other things. The entertainment division, Reliance Entertainment, had two entities: Reliance Big Entertainment and BIG Pictures.

SEBI’s latest ban pertains to Reliance Home Finance Ltd (RHFL), a non-banking financial entity that is a wholly owned subsidiary of Reliance Capital.

The RHFL fraud: Incorporated in 2008, RHFL provided housing finance, including home loans, construction loans and loans against property. The company was expected to expand ADAG’s reach into the mortgage market and had a steady growth rate. In the 2017-18 fiscal, it had over Rs 16,300 crore in assets under management. All seemed to be going well and by September 2017, it even listed on the stock exchanges; the stock debuted at Rs 104 on BSE.

However, over the next couple of years, things changed drastically.

In 2018, Infrastructure Leasing & Financial Services, which had accumulated huge debt, defaulted on its loan and interest payments. This triggered a larger crisis in the NBFC sector, hurting share prices and liquidity. RHFL, too, was hit and the company was downgraded by several rating agencies.

Then, in June 2019, its auditor Price Waterhouse & Co. Chartered Accountants LLP (PW) resigned without issuing the report for 2018-19. It cited lack of a “satisfactory response” to its queries while undertaking the assessment. PW suspected loan fraud by RHFL, amounting to Rs 7,900 crore as of March 2019. This was a startling number and a major red flag as RHFL had disbursed just Rs 900 crore of loans for the fiscal year ended 31 March 2018. Note that Ambani was the promoter and non-executive, non-independent director of parent Reliance Capital in the financial year 2018-19.

By March 2020, RHFL’s stock fell to Rs 0.75. Troubling news about the company began to emerge, including allegations of funds being diverted. That’s when SEBI began probing these claims.

It turns out that thousands of crores worth of loans were allegedly disbursed without due processes and to entities closely linked to RHFL’s promoters.

SEBI’s investigation revealed that between 2017-18 and 2018-19, loans by RHFL to companies increased from Rs 3,742.60 crore to Rs 8,670.80 crore. In the fiscal year ended March 2019, the company disbursed 97 general purpose working capital (GPC) loans worth Rs 8,470.65 crore to 45 borrowers who were financially weak. As many as 62 of these GPC loan applications were approved on the same day and 27 of the loans disbursed were sent to the applicants’ account the same day that the loan applications were sent. In fact, many of the borrowers even shared a common address and had links to ADAG and RHFL.

Also, despite the RHFL board instructing to not release more GPC loan funds, the company allegedly continued to do so.

“…Noticee No. 2 (Anil Ambani) approved 14 loan applications involving an amount of Rs 1,472.16 crore in his capacity as Chairman of Reliance ADA Group during a period of just over 1.5 months (between February 11, 2019 – March 31, 2019),” SEBI’s 222-page order said.

Apart from Anil Ambani, SEBI has also banned 24 others from the securities market and fined many managerial personnel for their alleged involvement in the fraudulent scheme. However, Ambani is not new to trouble.

A long list: Reliance Capital declared bankruptcy in 2021, making it the third of Ambani’s businesses—apart from Reliance Communications and Reliance Infrastructure—to undergo bankruptcy proceedings or debt restructuring. However, in April this year, the National Company Law Tribunal disposed of the insolvency case against Reliance Infrastructure.

Most of Ambani’s businesses have been marred by the same issues: high piles of debt, allegations of financial mismanagement, fund diversion and payment defaults.

Take the case of his power and infrastructure companies that had accumulated significant debts. In 2020, Reliance Naval and Engineering Ltd (previously Reliance Defence and Engineering), which had amassed debts of over Rs 9,500 crore, was admitted to insolvency proceedings.

Then there’s the debt-ridden telecoms business, Reliance Communications, which filed for bankruptcy in 2019. The following year, the company said it owed Rs 26,000 crore to lenders. However, its creditors, including banks and vendors, had claimed that the company and its subsidiaries owed them nearly Rs 86,000 crore.

Reliance Infrastructure, which built Mumbai’s first metro line, also underwent a similar fate after defaulting on bond payments.

Also, in 2019, Anil Ambani faced an imprisonment threat by the Supreme Court over non-payment of Rs 550 crore to Reliance Communications’s one-time vendor Ericsson AB's India unit. He has also been sued by three Chinese banks for defaulting debt payments. In February 2020, he declared himself bankrupt in a UK court, going as far as saying that he maintains a very simple lifestyle, is a teetotaller and sold off jewellery to pay legal fees.

With all of this, there’s little that remains of ADAG—except a rundown website—and the hopes of its investors and lenders.

Cover image by Devyani M/ The Morning Context

Correction: We have corrected the byline for this story to Disha Acharya from Diti Pujara.