HDFC Bank faces probe by US-based law firm2 min read . Updated: 18 Aug 2020, 07:18 AM IST
According to the law firms, HDFC Bank reported its financial results for the three months ended 30 June, missing analysts’ earnings estimates and reporting a deterioration in its asset quality
Two US-based law firms have announced independent investigations to build securities-fraud class-action lawsuits against HDFC Bank Ltd. The investigations by Rosen Law Firm and Schall Law Firm follow allegations that India’s largest private sector lender may have issued materially misleading business information to its investors.
In separate press releases issued on Sunday night, Rosen Law Firm and Schall Law Firm said they are preparing securities lawsuits on behalf of HDFC Bank shareholders.
On 14 July, Mint reported that HDFC Bank is looking into the alleged improper lending practices in its vehicle financing arm previously led by Ashok Khanna. The allegation was that the bank had forced its car loan customers to purchase a vehicle tracking device. Following this news, HDFC Bank’s American depositary receipt price fell by $1.37, or 2.83%, to close at $47.02.
According to the law firms, HDFC Bank reported its financial results for the three months ended 30 June, missing analysts’ earnings estimates and reporting a deterioration in its asset quality.
On 6 August, The Print reported that credit information bureau Experian Plc’s Indian unit told the Reserve Bank of India that “HDFC Bank has been late in providing details of its loans, including the repayment status of its millions of retail borrowers.
The law firms have sought information from HDFC Bank shareholders who are looking to recover losses in the bank’s securities. “We were unaware of any such development (class action lawsuit) till we heard about it from the media a little earlier today. We are getting details of it," said a spokesperson for HDFC Bank. “We’ll examine it and respond to it as appropriate. Prima facie, it does look frivolous as we believe we have been transparent in our disclosures."
Suresh Ganapathy, an analyst at Macquarie Securities, doesn’t expect the lawsuits to pose a challenge to the lender. “The bank has already taken corrective steps by firing the people who were involved in the alleged mis-selling," he said.
Amit Tandon, founder and managing director of Institutional Investor Advisory Services, a proxy advisory firm, said unless there is clarity, the benefit of doubt should be given to the bank. “Unless there is some more clarity, I will give the benefit of doubt to the bank. We are, after all, living in a time where it is not always possible to recognise or quantify conditions (at the time of filing accounts). These may not have existed then or surfaced only after filing the financial results," said Tandon.
Both Rosen Law Firm and Schall practise securities class actions and shareholder derivative litigation.
Last year, the law firms filed a class-action lawsuit against Infosys Ltd after an anonymous whistleblower group accused the company of taking “unethical" steps to boost short-term revenue and profits. A US court, however, dismissed the lawsuit in May this year.
A class-action lawsuit allows a group of people to sue an individual or a corporate defendant for financial or other damages caused by negligence or mismanagement.
In April, a group of five former US employees of Wipro filed a class-action lawsuit accusing the Indian IT company of employment discrimination against individuals who are not of Indian origin.