Reliance MF Invested Rs 2,850 Crore In YES Bank, Siphoned Off: Sources

Businessman Anil Ambani's Reliance Mutual Fund invested Rs 2,850 crore in AT-1 bonds of YES Bank for suspected quid pro quo, sources in the Enforcement Directorate have said. 

Additional Tier-1 or AT-1 bonds, unlike regular bonds, do not have a maturity date and investors don't get their principal back, but continue to receive a higher interest rate forever. The bank can convert them into equity if needed or write them off entirely.

In the case of Reliance Mutual Fund, the bonds were written off and the money was siphoned off, ED sources said, adding this money belonged to mutual fund investors. The Central Bureau of Investigation (CBI) is also looking into this matter.

ED sources said its investigation based on information provided by the capital markets regulator Securities and Exchange Board of India (SEBI) found Reliance Infrastructure diverted a large sum of money disguised as inter-corporate deposits (ICDs) to Reliance Group firms through a 'C' company, an unknown related party.

ICDs are loans given by one company to another.

Reliance Infrastructure did not disclose 'C' company as its related party in order to avoid proper approval from shareholder and audit committee, sources said. It was also hidden presumably to circumvent checks and balances imposed on related party transactions as per laws, they said.

Investigators found that Reliance Infrastructure took a haircut of Rs 5,480 crore and only Rs 4 crore has been received in cash, sources said

At least Rs 6,499 crore has been settled in the form of assignment or transfer of assets and economic rights, mainly in certain discoms.

These discoms didn't have any business for many years and are not operational, sources said, adding the chances of recovering this amount is bleak. In this case, the loan diversion is over Rs 10,000 crore.

More than 35 premises in Mumbai belonging to 50 companies and 25 people were searched earlier today under the Prevention of Money Laundering Act (PMLA).

Two group companies, Reliance Power and Reliance Infrastructure, said in separate but identical regulatory filings that the ED action has had "absolutely no impact" on their business operations, financial performance, shareholders, employees, or any other stakeholders.

"The media reports appear to pertain to allegations concerning transactions of Reliance Communications Limited (RCOM) or Reliance Home Finance Limited (RHFL) which are over 10 years old," the companies said.

Shares of Reliance Power and Reliance Infra dropped 5 per cent each, hitting their lower circuit limits on Thursday, following the ED raids.