Karvy Once Again Buying Time and Negotiating a Foreign Buyer for Its Data Management Business
Six months after Karvy Stock Broking Ltd (Karvy) was expelled by the National Stock Exchange (NSE) and declared a defaulter, there is almost no legal action against the firm by retail or institutional investors. This is because C Parthasarathy, its group chairman, has reached out to people with an assurance that the firm is close to selling its data management business, Karvy Data Management Services Ltd (KDMSL) and hopes to raise almost Rs1,000 crore, say people who are aware of developments. Meanwhile, Amitabh Chaturvedi has reportedly quit as group CEO (chief executive officer) of Karvy.
 
When contacted, Mr Parthasarathy confirmed  the development and sounded hopeful “there should be some progress in a month’s time or even earlier,” but he could not share more details at this time.
 
Some large investors contemplating litigation against Karvy were told that litigation and any coercive action would scuttle the deal and eliminate any chances of investors getting their money back. We learn that even the six large institutional investors like Axis Bank, and Bajaj Finance are holding back civil and criminal action in anticipation of a sale and assurance of repayment. 
 
While investors have been told that National Stock Exchange (NSE) and the Securities and Exchange Board of India (SEBI) were made aware of the developments, here is NSE’s response to our query about negotiations to sell the data management company: “Karvy has, for more than a year, claimed that they have finalised a deal with UK-based non-resident Indian (NRI) to gain full control of KSBL associate, subsidiary company KDMSL but we are not aware of the current status. However, NSE and other exchanges have monetised trading and demat accounts of Karvy. NSE, jointly with other MIIs (market infrastructure institutions), completed the transfer of the trading and demat accounts of Karvy to another stock broker and depository participant, through a formal bidding process.”
 
According to sources, after some payments have been made, the amount Karvy still owes to retail investors is around Rs480 crore. The Karvy default was earlier estimated at Rs1,000 crore but we learn that some small payments have been made and securities released bit by bit in the intervening period. It is still not clear at this stage whether the sale proceeds from the deal would cover the amount owed to all. 
 
Interestingly, NSE had expedited proceedings and begun to pay eligible investors up to Rs 25 lakh each on account of the Karvy default since January this year (Read: Karvy Investors Start Receiving Their Money from NSE's IPF in Record Time after Broker Expulsion). 
 
In November 2020 the NSE had claimed that it had settled claims worth Rs2300 crore of 2.35 lakh investors (Read: Karvy Default: NSE Settles Claims Worth Rs2,300 Crore of 2.35 Lakh Investors; More Expected).
 
Despite this, the claims of a large number of investors have been rejected and they were planning legal action collectively. But this group has also been assured of repayment once the sale goes through.
 
It has already been a long wait for investors, since Karvy’s trading rights were suspended as far back as December 2019. However, it was expelled only a year later. Interestingly,SEBI has initiated no action against any of the nearly dozen other Karvy group companies that are also under its regulatory ambit. 
 
Karvy’s website lists the following group companies, most of them regulated by SEBI: Karvy Comtrade (commodities broking), Karvy Capital Ltd, a non-banking financial services company (NBFC) and a portfolio manager, Karvy Investment Advisory Services Ltd (formerly an insurance broker), Karvy Holdings Ltd (core investment company), Karvy Middle East LLC (wealth management for non-resident Indians), Karvy Realty (India) Ltd, Karvy Financial Services Ltd (NBFC), Karvy Insurance Repository Ltd, Karvy Forex & Currencies Private Ltd, Karvy Consultants Ltd, Karvy Data Management Services Ltd, Karvy Investor Services Ltd, Karvy Insights Ltd, Karvy Analytics Ltd, Karvy Solar Power Ltd, Karvy Global Services Ltd, Karvy Global Services Inc, USA (into business process outsourcing) and Karvy Inc, USA.
 
According to NSE, none of these Karvy group companies is under its supervision. 
Comments
mr.singhvi
2 months ago
This is again nothing but time buying tactics deployed by promotor, they r sticking carrot in front of investor who have lost their hard earned money, they know very well that regulators will not do them any harm, one wonder how they are so confident that regulators will not harm them, it is brazen misuse of law, & faith. One thing is sure here in India, no matter which party comes to power, once u know the proper buttons in power center one can get away with anything.
vishwaspatankar70
2 months ago
It is ridiculous that the Promoter is free to roam the world as thousands of lenders are in the lurch. How does it happen in India that the fraudsters get away and the poor depositers are left to their own deviceds till they die. Institutional investors and vendors have recourse to courts, lawyers, arbitrators, and even strong men to extract their dues. What do retired people do when their life savings are tricked away from them by such depraved remorseless cheaters, who think nothing of letting the small lender die of anxiety or false hope?
The extent of applicability of the law and the how it protects its weak is an important benchmark to gauging the real development of a country. India, correctly is among the nations languishing at the bottom on most social, economic and judicial parameters. Merely tomtoming of being the fifth largest economy is laughable till the citizens feel a sense of security, equality and justice. High time Parthasarthy and his cohorts be made to see the insides of an Indian prison.
NAVINLUNIYA
2 months ago
moreover small investors have to run arround everywhere to transfer their holdings
mr.singhvi
4 months ago
This can happen only in India, powerful promotors r roaming free, even after clear evidence that they cheated, and misappropriated investors fund, even after two years no respite to investors whose pool account shares were sold/pledged by Karvy , STOCK EXCHANGE HAS WASHED THIER HANDS ENITIRLY SAYING MATTER IS WITH SAT/SEBI, SEBI SAYS MATTER IS IN HIGH COURT, matter will reach finally when investor is dead, so no more complaints, everybody is happy
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