SEBI Fines Ambani Family, Other Entities For Violating Takeover Rules

The Securities Exchange and Board of India has imposed a Rs 25 crore penalty on the Ambani family and related entities for failing to make an open offer when they increased promoter shareholding in Reliance Industries Ltd.

Fifteen members of the Ambani family including Chairman Mukesh Ambani, Anil Ambani, Nita Ambani and Tina Ambani have been penalised, according to a SEBI order. They have to jointly pay the penalty within 45 days, failing which the market regulator will initiate recovery proceedings by attaching their assets.

The penalty pertains to an increase in RIL’s promoter shareholding in 2000, the SEBI said. Promoters had increased their stake by 6.83% upon conversion of warrants allotted in 1994.

At the time, as per SEBI’s Takeover Regulations, the creeping acquisition limit was 5% per annum for acquirers holding between 15-55% stake. Any acquisition exceeding 5% would have to be accompanied by an open offer.

The promoter entities of Reliance Industries, Ambani family members and their corporate entities, failed to make such open offer, thus violating the regulations, the order said.

Since last year, SEBI has amended the takeover regulations to allow acquirers to increase stake by up to 10%.

The over 20-year old matter was at one time sought to be settled via SEBI’s consent mechanism, an application for which was made by the Ambanis in 2010 and rejected by SEBI in 2020.

While the Ambanis sought to use the delay in their favour and argued certain provisions of the Takeover Regulations did not apply to them, SEBI’s adjudicatory officer found no merit in those arguments and held that the Ambanis “by not making a public announcement have violated and have been continuing to violate the provisions of Regulation 11(1) of the Takeover Regulations”.

The markets watchdog noted that there were no “quantifiable figures” to assess if the Ambanis’ actions led to any unfair gain or loss to an investor. Yet, it said that by failing to make a public announcement, the promoters “deprived shareholders of their statutory rights/ opportunity to exit from the company”.

Shares of Reliance Industries Ltd. closed 0.97% higher on the Bombay Stock Exchange, while the S&P BSE Sensex ended trade 0.94% up.

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