The Securities and Exchange Board of India on Thursday barred Axis Capital Ltd. from debt merchant banking activities due to unpermitted guarantees for non-convertible debentures of Sojo Infotel Pvt Ltd., posing risks to market integrity and investors.
However, the merchant banker's parent clarified that its unit's activities were in compliance with all provisions.
The regulatory action followed a report by SEBI-registered analyst Hemindra Kishen Hazari highlighting concerns about Axis Capital's high-risk transactions.
SEBI observed that Axis Capital's involvement in Sojo Infotel's transaction resembled a banking operation, exposing the company to credit risk. By fulfilling its indemnity obligations, The investment banker incurred costs that could impact its credit profile.
-
'Worst Is Behind': Quant MF Sees Market Bottom, Flags 'Extreme Euphoria' In Midcaps -
India's Mutual Fund Industry Could Become A $1 Trillion Opportunity, Say Fund Managers -
'Foreign Investors Are Baraatis': Raamdeo Agrawal's Take On LTCG Tax -
India Could Gain If AI Trade Unwinds, US Midterms May Hurt Markets: Ramesh Damani -
'Switch Off The Noise, Focus On Earnings': Raamdeo Agrawal's Advice To Investors -
Stay Invested Through Market Cycles: Raamdeo Agrawal at NDTV Profit Ignite -
Ramesh Damani Remains Bullish On India For Next 20-30 Years, Sees Bargains Amid Market Weakness -
CAS Came After A Long Consultation Process: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFIT IGNITE -
Aim To Cut FPI Onboarding Time From Mth To Five Days: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFI -
'One Can Never Get Good News And Bad Share Price': S Naren, ICICI Pru Life AMC On NDTV Profit Ignite
The investment banking unit of Axis Bank Ltd. provided guarantees for non-convertible debentures, disguised as underwriting, which is not permitted, SEBI said in its order.
This activity, according to the markets regulator, has the potential to disrupt market integrity and mislead investors. The credit rating agencies viewed Axis Capital's guarantees as credit enhancements, affecting ratings and investor decisions, the order said.
SEBI also raised concerns about Axis Capital's fee structure, stating that the company's fees were structured as ongoing payments instead of one-time underwriting fees, indicating continuous credit support.
As Axis Capital is a wholly-owned subsidiary of Axis Bank, the Reserve Bank of India may need to investigate potential credit risks posed to the parent bank, the order stated.
Meanwhile, Axis Bank said that its units activities in the debt segment were "bona-fide and in compliance" with all applicable regulatory provision. No loss has been caused to any investor or market participant from such activities, it said in an exchange filing.
Axis Capital already discontinued activities in the debt segment over a year ago and is of the view that there is no material impact from the regulator's latest order, it said.
The subsidiary will continue operating all other business activities, including in the equity capital markets, mergers and acquisitions, etc.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.