Anil Ambani's story is a dramatic tale of ambition, mismanagement, and the harsh realities of business. Once celebrated as the sixth richest person in the world, with a net worth of approximately $42 billion in 2008, Ambani's fortunes have plummeted, leading him to declare bankruptcy in 2020. So, how did he go from the heights of success to facing such a massive financial ruin?
Where it all started
After the death of their father, Dhirubhai Ambani, in 2002, Anil Ambani took over the financial services, power, and telecom sectors of the Reliance empire. He was seen as a dynamic leader ready to carve out his own legacy. By 2007, Reliance Capital, under his leadership, boasted a market capitalization exceeding ₹70,000 crore, positioning it among India’s top financial institutions.
In 2008, Anil launched Reliance Power with great fanfare. The company aimed to develop 12 power projects with a total capacity of 28,000 MW - one of the largest portfolios in India at the time. The IPO was launched from January 15 to January 18, 2008, and it created a buzz in the market. Investors were excited about the potential returns, especially with the government promoting ultra mega power projects.
The Reliance Power IPO debacle
On February 11, 2008, Reliance Power's shares debuted on the Bombay Stock Exchange after raising a staggering ₹11,563 crore through its IPO. It was oversubscribed approximately 70 times, attracting over five million bids from eager investors. Initially, shares soared to ₹547.80 shortly after trading began - a promising start that quickly turned disastrous. By the end of the day, shares plummeted to ₹372.50, wiping out billions in market capitalization and leaving many small investors devastated.
The IPO's failure raised concerns about how a company with minimal profits—just ₹16 lakhs - and no significant assets could list at such a high price. The situation worsened due to external factors like the subprime financial crisis in the U.S., which had begun affecting global markets. In just five weeks before the IPO listing, India's Sensex had dropped by 4,000 points.
In an attempt to mitigate investor losses, Reliance Power announced free bonus shares for all shareholders except the promoters. Despite this gesture, the stock never regained its initial listing price.
The beginning of the downfall
Following the IPO debacle, Anil Ambani's ventures faced increasing challenges. High leverage and aggressive expansions into sectors like infrastructure began to strain finances. By 2018, Reliance Capital's financial health deteriorated significantly; rating agencies downgraded it to default status amid tightening liquidity conditions following major corporate failures like IL&FS.
In 2019, Anil declared bankruptcy in a UK court - a dramatic fall from grace for someone who was once among India's wealthiest individuals. His financial woes were compounded by legal troubles involving allegations of fund diversion at Reliance Home Finance Ltd (RHFL). In a surprising turn of events, all thanks to his brother, Mukesh Ambani stepped in to help Anil when he faced jail time over unpaid dues to Ericsson.
Just days before a Supreme Court deadline that could have landed Anil in prison for three months, Mukesh helped him settle ₹453 crore owed to Ericsson. Anil even publicly expressed gratitude towards Mukesh and his wife Nita for their timely support during his "trying times."
Legal troubles and SEBI’s action
In August 2024, the Securities and Exchange Board of India (SEBI) barred Anil Ambani and 24 others from participating in the securities market for five years due to their involvement in a fraudulent scheme that misappropriated funds from RHFL. Anil was fined ₹25 crore and restricted from holding any directorial positions in listed companies.
The SEBI report indicated that funds were disguised as loans to entities linked to him. This scandal added another layer of complexity to his already troubled financial landscape.
Despite these setbacks, there have been signs of recovery for Reliance Power, mostly because of Mukesh’s and Anil’s sons’ nvolvement. After hitting an all-time low of ₹1.15 in March 2020, its stock has seen significant growth due to strategic debt settlements and improved income reports. As of June 2024, Reliance Power reported a consolidated loss narrowing down to ₹97.85 crore compared to ₹296.31 crore in the previous year.
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