Kotak AMC, executives seek settlement in Essel Group debt dispute

MUMBAI: Kotak Mahindra Asset Management Co and its senior executives have approached the Securities and Exchange Board of India (Sebi) to settle long-running enforcement proceedings linked to the fund house's handling of investments in Essel Group's debt, even as their appeal against the Securities Appellate Tribunal order is pending before the Supreme Court.

Their June 29 settlement pleas, reviewed by ET, show that Kotak AMC managing director Nilesh Shah, former CIO-fixed income Lakshmi Iyer, and other key managerial personnel-Deepak Agrawal, Jolly Bhatt, Abhishek Bisen and Gaurang Shah -have sought to resolve the proceedings under Sebi's settlement regulations. The applications follow the Securities Appellate Tribunal's (SAT) March order upholding Sebi's 2022 adjudication that had imposed an aggregate penalty of ?1.2 crore on the six executives, after which they approached the Supreme Court.

Emails sent to Sebi, Kotak AMC and the executives concerned remained unanswered until the publication of this report.


The case dates back to the 2019 Essel liquidity crisis, when a sharp fall in Zee Entertainment's share price triggered margin calls on pledged shares securing debt held by six Kotak fixed maturity plans (FMPs). The case relates to Kotak Mutual Fund's six close-ended debt schemes (FMPs), which had invested in zero coupon non-convertible debentures (NCDs) issued by Konti Infrapower & Multiventures and Edison Utility Works, part of the Essel Group, the promoter group of Zee Entertainment Enterprises.

The investments were secured by pledged shares of Zee, with a collateral requirement of 150% of exposure. In January 2019, the Zee share price crashed, causing the collateral value to fall below the required level. The Essel entities failed to top up the pledge, and the debentures were eventually repaid months later after selling pledged shares.

Regulatory Charges
Sebi alleged several regulatory violations, including a lack of due diligence while investing in Essel group companies, failure to properly assess the creditworthiness of issuers, improper valuation of securities and delayed disclosures of developments to investors, among other things.