Axis Capital On SEBI Curbs: Not Taken Any Assignment As Merchant Banker In Over A Year

Axis Capital Ltd., which has been barred by the Securities and Exchange Board of India from debt merchant banking activities, said on Friday that it has not taken up any assignment in the segment for more than a year.

The company, in a release, said its income from the debt business for fiscal year 2023-24 accounted for only 5% of the total income earned during the period.

"ACL has discontinued and not taken any new assignments as a merchant banker, arranger or underwriter for any issue/offer for sale of securities in the debt segment in over a year," it added.

Axis Capital further noted that it is "evaluating all available legal remedies" in respect to the SEBI order.

In its interim order issued on Sept. 19, the markets regulator observed that Axis Capital's involvement in Sojo Infotel Pvt.'s transaction resembled a banking operation, exposing the company to credit risk.

The investment banking unit of Axis Bank Ltd. provided guarantees for non-convertible debentures, disguised as underwriting, which is not permitted, the order said.

This activity, according to the SEBI, 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 in an exchange filing that its unit "is of the view that its merchant banker, arranger and underwriter related activities for any issue/offer for sale of securities in the debt segment were bona-fide and in compliance with all applicable regulatory provisions".

Furthermore, no loss has been caused to any investor or market participant from such activities as on date, the parent company added.

Notably, the SEBI has not imposed any restriction on Axis Capital's other business activities including in the equity capital markets, mergers and acquisitions, private equity, and institutional equities domain.

Shares of Axis Bank were trading nearly flat at Rs 1242.65 apiece on the NSE, compared to a 1.46% rise in the benchmark Nifty 50 at 1:27 pm.