Social inequity threatens the long-term welfare and sustainability of society. Caste systems are inequitable social systems with a long history. Affirmative action quotas in public institutions ensure representation of all caste groups but similarity of affirmative action beneficiary status has the potential to become a basis for strong friendship ties and paradoxically support exclusion. In addition, caste groups in a three-tiered hierarchy, of non-visible distinctions, have different motivations towards homophily. To investigate homophily across affirmative action beneficiary/non-beneficiary status and the three caste blocks, we examine friendship ties across the whole caste hierarchy at an Indian business school. Findings from the social network study reveal evidence of affirmative action group membership homophily but elite caste block homophily rather than affirmative action block (middle and the marginalized caste blocks) homophily drive the effects. Further fine-grained analysis reveals ambivalence of the middle caste block towards homophily. Our paper enriches classical homophily theory and points to the paradoxical role of affirmative action quotas in reducing societal inequity by providing access but also becoming a bases for the formation of friendship ties.