India’s securities regulator, the Securities and Exchange Board of India (SEBI), censured Axis Capital Limited over guarantee-related support for Sojo Infotel debt tied to a 2021 bond placement.
Axis Bank said in its Oct. 30 exchange filing that SEBI issued a censure in a final order dated Oct. 28. Axis Bank wholly owns Axis Capital. The order concerned the company’s role in providing a guarantee to Sojo Infotel’s non-convertible debentures (NCDs).
SEBI’s Sept. 19, 2024, interim order said Sojo Infotel raised INR 2.6 billion through a private placement of NCDs in March 2021, with Axis Capital acting as arranger. After a partial repayment in 2023, INR 1.74 billion plus accrued interest remained outstanding, the order said.
Axis Capital deposited INR 1.6684 billion into an escrow account on March 19, 2024. The interim order said that deposit, along with funds already in escrow, was used to repay the NCDs and interest.
SEBI said its preliminary assessment was that the arrangement went beyond underwriting, which involves subscribing to or arranging subscriptions for securities left unsold. The regulator said Axis Capital’s commitment involved credit risk linked to repayment. SEBI’s interim order distinguished merchant bankers’ market-risk assignments from credit risk, which it said falls within banking’s domain.
Axis Bank said the final order noted that “no allegation of harm to investors or default by fraudulent design has been brought on record” in the case.
SEBI’s 2024 interim order restricted Axis Capital from taking new debt-segment assignments as a merchant banker, arranger or underwriter while an inspection was pending. A confirmatory order on Nov. 26, 2024, narrowed the restriction to transactions involving alleged credit-risk cover, guarantees or indemnities.
In a Sept. 19, 2024, filing, Axis Bank said it expected no material impact on the bank from the interim order. It said Axis Capital’s profit after tax for fiscal 2023-24 was about 0.70% of the bank’s consolidated profit after tax, while the subsidiary’s debt-business income was about 5% of its total income. That was the bank’s assessment at the time of the interim order.
