Reliance Power, Reliance Infra shares drop 5% each today; here's why

Shares of Reliance Power Ltd and Reliance Infrastructure Ltd fell 5 per cent each in Wednesday's trade after the market regulator SEBI turned down a settlement proposal from industrialist Anil Ambani regarding charges linked to investments in YES Bank, placing him at risk of a $208.40 million penalty. Anil Ambani is not on the boards of Reliance Power and Reliance Infrastructure, but is among promoters at both the ADAG group companies.

On Wednesday, Reliance Power declined 4.92 per cent to hit a low of Rs 41.73 on BSE. Reliance Infrastructure shares fell 5 per cent to hit a low of Rs 257.55 apiece. It was later trading at Rs 260.95, down 3.74 per cent. 

SEBI's investigation uncovered that Ambani's Reliance Mutual Fund invested $245.30 million in YES Bank's additional Tier-1 bonds before the bank's 2020 insolvency.

Between 2016 and 2019, the investments in question were allegedly tied to loans that YES Bank extended to other companies within the Ambani group. According to SEBI, these transactions were treated as a “bilateral relationship deal,” with both Anil Ambani and his son, Jai Anmol Ambani, accused of influencing investment decisions through Sundeep Sikka, the fund’s chief executive.

SEBI rejected the settlement proposal, highlighting an estimated $208.40 million loss to investors as a result of the fund’s actions. The case centres on alleged breaches of internal investment policies, which the regulator says had a “market-wide impact.”

The watchdog has notified Ambani and his son of upcoming directives to compensate affected investors and may also impose monetary penalties. “SEBI has also shared its findings with the Enforcement Directorate,” two sources familiar with the matter told Reuters.

Anil Ambani is under intensified scrutiny after the collapse of YES Bank, a lender previously tied to his companies. Authorities are also probing an alleged scheme to divert $342.3 million in loans from the bank.

The charges against Ambani also implicate the fund house’s top executives — including the chief executive, chief investment officer, and former chief risk officer — all of whom have filed a $1.08 million settlement application now under review. SEBI records state that there were “lapses and non-compliance” with internal policies, along with bypassing risk controls when increasing sub-limits and making investments.

The mutual fund involved, which was sold to Nippon Life Insurance in 2019, relates to transactions that occurred before the alleged misconduct tied to these investments.