Mumbai: The Securities and Appellate Tribunal (SAT) on Tuesday gave Securities and Exchange Board of India (Sebi) time till 10 December to pass an order in the plea filed by Bajaj Finance Ltd against the capital market regulator’s move to transfer pledged shares to clients of the troubled Karvy Stock Broking Ltd.
Sebi has estimated the total exposure of lenders to Karvy at ₹2,800 crore, of which Bajaj Finance has an exposure of ₹345 crore as per a copy of the petition reviewed by Mint.
Bajaj Finance is aggrieved by the Sebi order, which prevents it from accessing its pledged shares. The firm claimed that it has the right to its pledged securities and that Sebi was wrong in returning the securities to the accounts of Karvy’s clients.
HDFC Bank Ltd, ICICI Bank Ltd and some other lenders also joined Bajaj Finance on Tuesday in its plea against the Sebi move. An order in their pleas will be passed later. SAT asked Sebi to hear Bajaj Finance’s plea by Wednesday.
Early on Monday, the National Stock Exchange of India Ltd (NSE) and the BSE suspended Karvy’s trading licence for all segments due to non-compliance with the exchange’s and Sebi norms. Multi Commodity Exchange (MCX) and MSEI also suspended the licence of the brokerage firm.\
This action follows the 22 November order by Sebi which had said the brokerage firm misused client securities and used it for other purposes. Karvy had sold clients securities and the proceeds were transferred to related party businesses such as Karvy Realty Ltd.
Sebi’s prompt action against Karvy has resulted in nearly 83,000 investors getting back their securities, which were illegally transferred by the brokerage firm to its own account and were even pledged without any authorisation.
With the latest transfer by National Securities Depository Ltd (NSDL), nearly 90% investors have got back their securities and the remaining ones will get after clearing their dues.
Karvy took loans to the tune of ₹600 crore by pledging securities worth more than ₹2,300 crore of 95,000 clients with lenders. Of these, 95,000 clients, nearly 83,000 of them have got their securities.
On 20 November, Bajaj Finance issued a loan recall notice to Karvy and the pledges against the loan would have been invoked on 23 November. Sebi had on 22 November barred depositories from transferring securities from Karvy’s account except to beneficial owners or clients who had paid in full. The petition also says Karvy had given a false undertaking to Bajaj Finance that these securities belonged to the brokerage.