SEBI Restricts Axis Capital: Merchant Banking Rules Breach

Markets regulator Sebi has barred Axis Capital from taking on new assignments as a merchant banker for debt securities. This action follows an investigation that revealed Axis Capital provided guarantees for the redemption of NCDs of Sojo Infotel, a practice not allowed under current regulations.

The Securities and Exchange Board of India (Sebi) has issued an interim order restraining Axis Capital from undertaking new assignments as a merchant banker for debt securities. This move comes in light of Axis Capital's involvement in providing guarantees for Non-Convertible Debentures (NCDs) of Sojo Infotel.

According to Sebi, Axis Capital's guarantees toward NCDs, which were presented as underwriting, violate existing regulatory standards. This practice exposes the financial system to significant risks by potentially disrupting market order.

An inspection revealed that Axis Capital, a subsidiary of Axis Bank, acted beyond the scope of its permitted activities, incurring credit risks rather than market risks. Consequently, Sebi has ordered Axis Capital to cease all new assignments as a merchant banker for debt securities until further notice and respond within 21 days to the issues highlighted.

(With inputs from agencies.)