Anil Ambani
Anil Ambani, once the sixth richest person in the world, is now distancing himself from the companies he created. The foundation of Anil Dhirubhai Ambani Group (ADAG), which he had laid after the division of the Reliance empire, today seems to be different from the flagship companies of the same group. This is not a mere coincidence, but behind it there appears to be a tightening grip of the investigating agencies and a last attempt to save the sinking empire.
Amid the ongoing investigation by the Enforcement Directorate (ED) and SEBI, Anil Ambani’s departure from the board and management of his companies is a big signal for the market and investors. Let us understand what is going on behind the scenes and what impact it can have on common investors.
fear of investigation
Recently, when the Enforcement Directorate (ED) called Anil Ambani for questioning, this news spread like wildfire. The case pertains to money laundering and violation of foreign exchange rules under FEMA. After appearing in August, when he was called again in November, Ambani requested to appear through video conferencing citing ill health or other reasons.
But the most surprising thing was the clarification from Reliance Group. The group spokesperson clarified that “Anil Ambani is not on the board of Reliance Infrastructure.” The statement stressed that he was only a non-executive director from 2007 to 2022 and had no involvement in the day-to-day functioning of the company.
Experts say that this statement is not ordinary. This seems to be part of a well-thought-out strategy. When SEBI ordered him to step down from the boards of companies in 2022, it was a compulsion. But today, when the ED raids and interrogation are going on, the group is trying to prove that the company and Anil Ambani are two different poles. The objective is clear, the personal legal troubles of the promoter should not affect the functioning of the company and its share prices.
Companies slipping under the burden of debt
Anil Ambani’s troubles are not limited to the investigating agencies only. His business empire seems to be falling apart like a pack of cards. Reliance Communications (RCom), which was once the country’s leading telecom company, is today going through bankruptcy process. Reliance Infrastructure has clarified that most of the assets attached by ED belong to RCom, which is no longer controlled by Anil Ambani but by the Committee of Creditors (CoC).
The company even said in its defense that Anil Ambani had resigned from RCom in 2019 itself and now he has nothing to do with it. Same happened with Reliance Capital, which was once a Rs 70,000 crore company, but due to huge debt, it went into the hands of IndusInd International Holdings (IIHL).
Even in the Yes Bank case, where there were allegations of collusion with Rana Kapoor and loss of thousands of crores, Reliance Power shrugged it off and said that the management of Reliance Commercial Finance and Reliance Home Finance has completely changed and Anil Ambani was never on their boards. All this shows that the group is now more concerned with saving the existence of the ‘company’ than the brand value of the name ‘Ambani’.
Will we be able to win back the trust of investors?
This period is very challenging for Anil Ambani. On one hand, companies like Reliance Power and Reliance Infrastructure are claiming to be debt free (on standalone basis), while on the other hand, the credibility of the promoter has been compromised. Its direct effect has been seen in the stock market. This year, shares of Reliance Infrastructure have fallen by about 44% and Reliance Power by more than 10%.
The question is whether Anil Ambani will be able to make a comeback after coming out of the maze of investigating agencies (ED, CBI, SEBI)? In 2008, Reliance Power’s IPO was India’s largest IPO, which received 70 times subscription. Today that trust is missing. However, some companies are still technically ‘alive’ and raise hopes of recovery, but repeated SEBI notices and fraud allegations are scaring investors.
Anil Ambani’s current stance shows that he is no longer in a position to play on the ‘front foot’. They are trying to protect companies from regulatory action by holding themselves back. It will be interesting to see whether this ‘distance’ will save his empire from collapse, or is it the beginning of a bigger end.