Description

SEBI imposes penalty on AFCO Capital India Private Limited for violations in managing open offer for Standard Shoe Sole And Mould (India) Limited, including failure to open separate acquisition window and compliance delays.

Summary

SEBI issued Adjudication Order No. Order/AK/RK/2025-26/31797 against AFCO Capital India Private Limited (Registration No. INM000012555), a registered Merchant Banker, for violations of SEBI (Merchant Bankers) Regulations, 1992 and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The violations occurred during AFCO’s role as Manager to the open offer by Buildox Private Limited (Acquirer) for acquisition of shares of Standard Shoe Sole And Mould (India) Limited (Target Company). The adjudication proceedings were initiated under Section 15-I of the SEBI Act, 1992.

Key Points

  • AFCO Capital India Private Limited acted as Merchant Banker for Buildox Private Limited’s open offer for Standard Shoe Sole And Mould (India) Limited
  • Four major violations alleged: (1) Failure to open separate acquisition window in the open offer, (2) Delayed submission of half-yearly reports, (3) Delayed appointment of Compliance Officer, (4) Delayed intimation to SEBI regarding resignation and appointment of Compliance Officer
  • Acquirer (Buildox Private Limited) had acquired 13,14,107 shares from BG Chemicals Pvt. Ltd. via Share Purchase Agreement dated August 01, 2023
  • Adjudicating Officer appointed on November 22, 2024 under Section 19 r/w Section 15-I(1) of SEBI Act
  • Show Cause Notice issued on February 13, 2025 (Ref. No. SEBI/HO/EAD/EAD6/P/OW/2025/000/4949/1)
  • Noticee initially applied for settlement under SEBI (Settlement Proceedings) Regulations, 2018 on February 27, 2025
  • Settlement application rejected by SEBI on September 10, 2025
  • Noticee submitted reply to SCN on September 29, 2025
  • Penalty proceedings initiated under Sections 15HB and 15A(a) of SEBI Act

Regulatory Violations

Violation 1: Failure to Open Separate Acquisition Window

  • AFCO failed to open a separate acquisition window as required under SAST Regulations during the open offer process for SSSML shares

Violation 2: Delayed Half-Yearly Reports

  • AFCO submitted mandatory half-yearly reports to SEBI beyond prescribed timelines under Merchant Bankers Regulations

Violation 3: Delayed Compliance Officer Appointment

  • AFCO delayed the appointment of Compliance Officer, violating Merchant Bankers Regulations requirements

Violation 4: Delayed Intimation of Compliance Officer Changes

  • AFCO failed to inform SEBI within prescribed timelines regarding resignation and appointment of Compliance Officer

Compliance Requirements

  • Merchant Bankers must ensure strict adherence to SEBI (Merchant Bankers) Regulations, 1992
  • Compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 mandatory for managing open offers
  • Separate acquisition window must be opened during open offer process as per SAST Regulations
  • Half-yearly reports must be submitted to SEBI within prescribed timelines
  • Compliance Officer must be appointed without delay and any changes must be intimated to SEBI promptly
  • Merchant Bankers managing takeover offers must ensure all procedural requirements are met during Draft Letter of Offer stage

Important Dates

  • August 01, 2023: Share Purchase Agreement executed between Acquirer and BG Chemicals Pvt. Ltd. for 13,14,107 shares of SSSML
  • November 22, 2024: Adjudicating Officer appointed by SEBI
  • February 13, 2025: Show Cause Notice issued to AFCO Capital (Ref. No. SEBI/HO/EAD/EAD6/P/OW/2025/000/4949/1)
  • February 27, 2025: Noticee applied for settlement mechanism
  • September 10, 2025: Settlement application rejected by SEBI
  • September 29, 2025: Noticee submitted reply to Show Cause Notice

Impact Assessment

Market Impact: Medium - This enforcement action reinforces SEBI’s oversight of merchant banking activities and takeover processes. While specific to one transaction, it sends a signal to all merchant bankers about strict compliance requirements.

Regulatory Impact: High - Demonstrates SEBI’s commitment to enforcing procedural compliance in takeover transactions, particularly regarding acquisition windows and merchant banker obligations.

Entity Impact: High for AFCO Capital - As a registered merchant banker (INM000012555), violations could result in monetary penalties under Sections 15HB and 15A(a) and potential reputational damage.

Investor Impact: Low - Procedural violations by merchant banker, while serious from compliance perspective, have limited direct impact on investors in this specific transaction.

Precedent Value: Medium - Reinforces importance of procedural compliance in open offer processes and merchant banker responsibilities for timely reporting and governance requirements.

Impact Justification

Enforcement action against registered merchant banker for procedural violations in takeover process. Demonstrates regulatory oversight but limited broader market impact.