New Delhi, Oct. 1 -- The Edelweiss group's alternative investment arm and a stressed assets fund set up a 'Fund Board' that includes two independent members and a Governance Committee to address conflict of interest situations, as part of settling allegations the capital markets regulator raised that they weren't acting in the interest of investors.
The Edelweiss Stressed and Troubled Assets Revival Fund and its manager Edelweiss Alternative Asset Advisors Ltd, now known as EAAA India Alternatives Ltd, also paid a total of Rs 61.42 lakh (about $69,250) to settle the allegations, according to a settlement order issued by the Securities and Exchange Board of India (SEBI) on Tuesday.
In addition, the two entities took action against the executives who were found to be in default, taking them off the Investment Committee from FY18 and FY21, respectively, and submitted that the executives will not engage or associate with the company in any manner for 12 months.
Edelweiss launched the stressed assets fund in 2012. The fund had a target of raising as much as Rs 500 crore, including a greenshoe option of Rs 200 crore. It raised Rs 160 crore by April 2013, according to a report at the time by the Mint newspaper citing Edelweiss vice chairman Venkat Ramaswamy. It likely made its final close around that level.
The fund focussed on investing in stressed assets in the fashion and textile industry. One of its portfolio companies was the materials manufacturer Blue Blends (India) Ltd, which the fund backed in 2017, according to VCCEdge.
According to the SEBI order, it had issued a show-cause notice to the fund and its manager on July 12, 2024. The notice alleged that the fund failed to act in the interest of investors and exercise independent professional judgment, thereby violating the regulator's directions issued to AIFs.
The notice also alleged that the fund manager failed to carry out activities in accordance with the private placement memorandum, failed to implement policies and procedures to "appropriately mitigate conflict of interest" and submitted inaccurate information to its trustee for 2016-17 and that its sponsor and investment manager failed to act in the interest of investors.
The fund and its manager filed settlement applications last year. The settlement terms were put forward by the Internal Committee of SEBI, which included the fine finally paid and the entities' submissions on whether the irregularities have been addressed and whether the executives should be held liable for their actions.
The fund and its manager submitted their settlement terms in January 2025, and the matter was deliberated on by SEBI's High Powered Advisory Committee later that month. The committee said the terms were acceptable "subject to a non-monetary term i.e. the officers-in-default shall not engage/associate with the company in any manner".
The terms of the executives' non-association with the fund was decided by SEBI's Internal Committee in May 2025.
Published by HT Digital Content Services with permission from VC Circle.