Sebi bars Axis Capital from taking new debt merchant banking assignments

Securities and Exchange Board of India (Sebi) on Thursday restrained Axis Capital (ACL), a wholly owned subsidiary of Axis Bank, from taking any new assignment as a merchant banker, arranger or underwriter in the debt segment for alleged violation of the norms.

In an order, Sebi, following its probe into NCDs issued by Sojo Infotel, for which ACL was the merchant banker, alleged that ACL provided guarantee or indemnity towards redemption of NCDs in the guise of underwriting, which it is not permitted under the regulations. Such activity poses risk to the financial system as it can potentially disrupt the orderly functioning of the market.

“Credit rating agencies construed such guarantee/indemnity as credit enhancement and rated the instruments accordingly, which the investors relied upon,” said Sebi in its interim order.