Due to Disclosure Violations, Sebi Fines EbixCash and Ebix of INR 6 lakh

Nitin Konde, Varun Bhardwaj

Dec 20, 2024 — 2 min read

SEBI Fines EbixCash and Ebix INR 6 Lakh for Disclosure Violations

EbixCash Ltd and its promoter business, Ebix Inc., were fined INR 6 lakh by capital markets regulator Sebi on 19 December for violating disclosure requirements pertaining to the company's planned initial public offering (IPO). The financial services firm EbixCash withdrew its draft red herring prospectus (DRHP) from the regulator in December of last year, after having submitted it in March 2022. Following the regulator's examination into alleged violations of the Sebi's ICDR (Issue of Capital and Disclosure Requirements) rules, the fines were imposed.

In issuing its remarks on the DRHP dated March 2022, which was connected to the planned IPO of EbixCash filed with Sebi by the lead manager to the issue, Sebi allegedly discovered instances of non-compliances against EbixCash, Ebix Singapore, and Ebix Inc. This led to the order.

78 Pages Detailed Report

Sebi concluded in a 78-page verdict that EbixCash and Ebix Inc. had not sufficiently disclosed important information, such as Reserve Bank of India (RBI) regulatory actions, arbitration decisions, and modifications to the DRHP's IPO funds use.

The RBI issued a "Letter of Displeasure" in March 2023 about EbixCash subsidiary Ebix Payment Services' gift card operation, which the regulator pointed out was not fully disclosed. Because the regulatory action affected the company's financial reporting, this omission was considered important.

Sebi also pointed out significant discrepancies in Ebix Inc.'s press releases, including claims regarding arbitration decisions and revenue recognition modifications. The market's watchdog said that these claims were in conflict with or left out information from the DRHP that was submitted to the regulator.

Response from EbixCash

EbixCash stated in its defence that the company had quickly filed an updated DRHP with the required information and that the disclosures were compliant with regulatory standards. Furthermore, given that it is a foreign business, Ebix Inc. argued that Sebi lacked jurisdiction over the transaction.

The regulator, however, rejected these claims, highlighting the necessity of regular and open disclosures to protect the interests of investors. In addition to fining both organisations, Sebi emphasised that issuers and their promoters must make sure that public statements are consistent with the offer documentation. As a result, the regulator fined EbixCash Ltd and Ebix Inc INR 3 lakh each for failing to adhere to the disclosure standards.

In March 2022, EbixCash submitted its DRHP to SEBI in order to raise INR 6,000 Cr through a new share offering. The public issue, however, never came to pass. Yet, in recent years, the company's US-based parent has been on a downward spiral due to alleged corporate governance violations. After failing on a $617 million loan and other covenants related to this debt, its parent company, Ebix Inc., which is listed on the Nasdaq, filed for bankruptcy in the US in December 2023. In the end, Ebix Inc. and its subsidiary EbixCash were purchased by BSE-listed Eraaya LifeSpaces for $151.577 million in August 2024.