India probes debt trustee units of SBI, Axis, IDBI on suspected fee cartel

Trustees say fee rise justified, watchdog acting beyond powers

India's antitrust body is investigating the trustee units of State Bank of India, Axis Bank and IDBI Bank for suspected collusion on fees, triggering a lawsuit by a group representing them, documents seen by Reuters showed.

Indian regulations mandate that companies raising debt appoint a so-called "debenture trustee" to protect the interests of investors. The trustees charge a fee from the companies issuing the debt and make independent due-diligence checks on them.

The three under investigation - SBICAP Trustee Company, Axis Trustee and IDBI Trusteeship - are among the leaders in the business in India overseeing hundreds of billions of dollars by rendering trustee services for not just debt securities, but also real estate and other investment funds.

The Competition Commission of India (CCI) in a confidential December order stated the Trustees Association of India - a body where the trio are founding members - last year "substantially" increased the fee for assisting companies raising debt and prevented members from going below a floor price, thereby hurting competition.

The association has launched a court challenge in Mumbai that seeks to quash the antitrust investigation directive it has termed "illegal" and "capricious", according to court filings. The lawsuit will be heard on Thursday.

The antitrust probe and the impending court hearing, details of which have not been previously reported, could have ramifications on India's almost $500 billion corporate debt market by altering costs and affecting the way trustees operate.

A finding of cartelisation could lead to a fine of up to three times the profit in each year the fee was fixed by the trustees, or 10% of annual revenue for the period of violation, whichever is more.