Anil Ambani: How the world's former 6th richest man became bankrupt, banned in just over a decade

In a significant blow to Anil Ambani, the Securities and Exchange Board of India (SEBI) has banned him and 24 other entities from the securities market for five years. The decision follows allegations of fund diversion at Reliance Home Finance (RHFL), where Ambani, as the former chairman, was found to have orchestrated a fraudulent scheme. SEBI's 222-page order detailed that Ambani, leveraging his position within the ADA group and his indirect shareholding in RHFL, siphoned off funds under the guise of loans to entities linked to him.

Adding to Ambani’s troubles, SEBI also imposed a fine of ₹25 crore on Ambani, alongside penalties on other individuals and entities involved in the scheme. The order emphasized that loans were approved to companies with minimal assets or revenue, raising serious concerns about the legitimacy of these transactions. Despite directives from the RHFL Board to halt these practices, the company’s management ignored these instructions, leading to a significant governance failure.

Supreme Court Overturns Arbitral Award, Worsening Financial Woes

Earlier this year in April, the Supreme Court recently overturned an ₹8,000 crore arbitral award granted to a firm within his group. This decision is linked to a concession agreement between Delhi Airport Metro Express Pvt. Ltd. (DAMEPL), a subsidiary of Reliance Infrastructure, and Delhi Metro Rail Corporation (DMRC), established in 2008. The court mandated that DAMEPL refund approximately ₹3,300 crore previously paid under the arbitral award.

In response, Reliance Infrastructure clarified in a stock exchange filing, "The Order dated April 10, 2024, passed by the Supreme Court does not impose any liability on the company and the company has not received any money from DMRC/DAMEPL under the arbitral award." The company further emphasized that although DAMEPL is a subsidiary, it operates as a separate entity, meaning the liability falls on DAMEPL, not directly on Reliance Infrastructure.

Anil Ambani's net worth and his Fall from Grace

Anil Ambani’s financial troubles are not new. In February 2020, he declared bankruptcy in a UK court amid a series of legal and financial challenges. Once valued at $42 billion and ranked as the sixth richest person globally in 2008, Ambani's fortunes have sharply declined over the years.

Anil Ambani’s business journey is one of remarkable highs and devastating lows. His ascent in the business world began in the 1980s, after his father, Dhirubhai Ambani, suffered a stroke in 1986. Anil took on the day-to-day management of Reliance's financial dealings, and following Dhirubhai's death in 2002, Anil and his elder brother Mukesh Ambani jointly led the Reliance conglomerate.

However, in 2005, disputes over control led to a split between the brothers. Mukesh retained control over the flagship oil and petrochemical businesses, while Anil took over newer ventures, including telecommunications, power generation, and financial services. Despite ambitious expansion plans, many of these ventures, heavily financed through borrowing, faced significant challenges.

Failed Ventures and Mounting Legal Challenges

Anil Ambani’s forays into various sectors, including infrastructure, defense, and entertainment, met with limited success. His attempt to establish a mega gas-based power project in Dadri, Uttar Pradesh, faced a significant setback when the Allahabad High Court quashed the land acquisition in 2009. His ventures into the entertainment industry, including deals with Adlabs and DreamWorks, also failed to yield the expected returns.

Financial troubles deepened when Reliance Communications (RCom), his telecom venture, began to accumulate substantial debt. In 2019, the company was driven into insolvency proceedings. The same year, Ambani faced severe legal pressure when the Supreme Court threatened to imprison him after RCom failed to pay ₹550 crore to Ericsson AB’s Indian unit. Mukesh Ambani stepped in at the last minute to provide the necessary funds, preventing his brother’s imprisonment.

Further legal challenges arose when three Chinese banks sued Anil Ambani in a London court over a $680 million loan default. The loans were extended to RCom in 2012, with Anil allegedly providing a personal guarantee. However, Ambani argued in court that he had only provided a non-binding "personal comfort letter," not a guarantee tied to his assets. This case remains unresolved.

Ongoing Financial Struggles

The financial difficulties for Anil Ambani’s business empire are far from over. In 2021, Reliance Capital, another key company within his group, filed for bankruptcy after defaulting on bonds worth ₹24,000 crore. Reliance Infrastructure, known for its role in building Mumbai's first metro line, also faced financial strain, missing a bond payment while awaiting funds from asset sales.

Despite these ongoing challenges, Anil Ambani's influence on various industries in India cannot be overlooked. His journey from being one of the wealthiest individuals in the world to facing severe financial and legal difficulties highlights the volatile nature of the business world. The future of his once-thriving empire remains uncertain as he continues to navigate these turbulent waters.