The market regulator held that Karvy had misused client securities by pledging them with various lenders without authorization
In a stock exchange filing, Bajaj Finance said that it has invoked 24 lakh pledged shares of KDMSL representing 10% equity stake in the company
Non-bank lender Bajaj Finance Ltd on Thursday said that it has invoked shares of Karvy Data Management Services Ltd (KDMSL), which were pledged by Karvy Stock Broking Ltd to raise funds from the lender.
In a stock exchange filing, Bajaj Finance said that it has invoked 24 lakh pledged shares of KDMSL representing 10% equity stake in the company.
KDMSL, incorporated in 2008, is a Hyderabad-based step-down subsidiary of Karvy Stock Broking and provides business and knowledge process services. The company started off with back-office services and has over the years added various other services to its portfolio to cater to the banking, telecom, and e-commerce sectors.
“The shares of KDMSL were pledged with the company for securing the outstanding dues of Karvy Stock Broking Limited, the borrower company. The company has invoked the pledged shares of KDMSL for recovery of its dues," the stock exchange filing said.
Bajaj Finance is amongst the group of lenders with the largest exposure to Karvy Stock Broking, which raised money from the lenders by pledging shares belonging to its clients.
On 22 November, Sebi barred Karvy from acquiring new clients and from using power of attorney, thereby barring it from trading on behalf of clients, after the broker allegedly transferred clients’ money for other purposes and indulged in trade not authorized by them.
The market regulator held that Karvy had misused client securities by pledging them with various lenders without authorization.
These securities were used to raise funds from banks, some of the securities were sold off and the proceeds were transferred to its real estate arm – Karvy Realty Ltd.
Since then some of the lenders including Bajaj Finance have been engaged in a legal tussle over these pledged shares.
The Securities and Exchange Board of India (Sebi) on 14 December declined to give any relief to the four lenders -Bajaj Finance Ltd, ICICI Bank, HDFC Bank, IndusInd Bank, Mint reported. The lenders had lost control over pledged shares after they were transferred by National Securities Depository Ltd into clients’ accounts.
The four lenders including Bajaj Finance, ICICI Bank, HDFC Bank, IndusInd Bank had extended ₹345 crore, ₹642 crore, ₹208 crore and ₹159 crore to the broking firm against pledge shares worth ₹2873 crore as of 16 September 2019. These pledged shares came down to ₹2319 crore in November 2019.
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