The Securities and Exchange Board of India (Sebi) has revised its interim order concerning Axis Capital Ltd., imposing new restrictions that prevent the firm from participating in debt segment transactions that involve offering credit risk coverage, guarantees, and indemnities for the acquisition of pledged shares until further notice.

This adjustment underscores Sebi’s commitment to maintaining regulatory compliance and ensuring that financial institutions operate within the established legal framework.

Previously, in September, Sebi had already placed restrictions on Axis Capital, barring the firm from taking on new roles as a merchant banker, arranger, or underwriter for debt securities due to alleged breaches of the Merchant Bankers Regulations of 1992.

The concerns stem from Axis Capital’s purported involvement in providing guarantees and indemnities for non-convertible debentures issued by Sojo Infotel Pvt. Ltd., which was viewed as straying beyond the typical functions of underwriting and issue management, leaning more towards banking activities. Sebi’s Whole Time Member, Ashwani Bhatia, clarified that the debarment specifically targets actions that violate the Merchant Bankers Regulations, emphasizing that Axis Capital is restricted from engaging in any activities related to credit risk cover or structured secured credit transactions.

Furthermore, Sebi’s investigation revealed that Axis Capital had participated in similar transactions in five other instances between FY22 and FY23, which were characterized as secured credit transactions, indicating a shift in the firm’s risk profile from market risk to credit risk.

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