The restriction comes as an interim measure after the regulator found that Axis Capital had provided a guarantee/indemnity for redemption of NCDs under the guise of subscription, which is not permissible to do under the existing regulatory framework.
The activity, according to Sebi’s order, poses a risk to the financial system as it can potentially disrupt the orderly functioning of the market.
The market regulator issued the order on Thursday following an inspection of ACL, which was conducted after a news report dated January 16, 2024 titled “Is Axis Capital an Investment Bank or a Hedge Fund?” highlighted certain concerns related to a “high-risk transaction undertaken by Axis Capital Limited (ACL).”
ACL is a Sebi registered commercial bank and a wholly owned subsidiary of Axis Bank.
Sebi, in its probe, examined whether the transactions carried out by ACL in respect of the listed non-convertible debentures (NCDs) of Sojo Infotel were in accordance with regulatory norms. Sojo issued NCDs worth Rs 260 crore on March 25, 2021, and Axis Trustee Services Ltd. was the trustee, while ACL was the arranger of the issue. Sojo is a private limited company engaged in the business of high-tech consultancy services in the field of electronics, telecommunication and information technology, including software.
ACL is free to submit its objections within 21 days.
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