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Bajaj Finance gains after SAT suspends transfer of securities in Karvy case

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Bajaj Finance advanced 0.33% to Rs 3980.40 after the Securities Appellate Tribunal (SAT) asked the Securities and Exchange Board of India (Sebi) to hear the company's plea.

SAT on Tuesday suspended the transfer of shares from the depository account of Karvy Stock Broking (KSBL) and directed Sebi's whole-time director to hear Bajaj Finance's grievances, which had challenged the market regulator's share-shift order.

Bajaj Finance said that its current exposure to KSBL as at 2 December 2019 is approximately Rs 312 crore, which was against the pledge of listed shares.

A preliminary report given by the NSE had pointed out that securities worth Rs 2,300 crore of more than 95,000 clients were transferred by KSBL to one demat account which was never disclosed by the brokerage to the bourses.

Following the disclosure, Sebi asked depositories to return the majority of client shares pledged by KSBL with its lenders. Later, Bajaj Finance filed an appeal before the SAT against the unilateral action taken by National Securities Depository (NSDL) for release of valid pledge created by KSBL pursuant to Sebi's order.

The SAT directed Sebi to grant a personal hearing to the company on the basis of the representation made earlier including any further representation to be made by the company. The appellate tribunal also directed that any transfer of remaining securities from depository participant (DP) account of KSBL shall remain suspended.

The matter is sub-judice and the company will continue to pursue its legal and legitimate rights. The aforesaid does not in any manner impact the rest of the company's loan against securities business, Bajaj Finance said in a statement. The announcement was made post trading hours yesterday, 3 December 2019.

Early on Monday, the National Stock Exchange of India (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.

Karvy had pledged securities worth Rs 2,300 crore of over 95,000 clients with ICICI Bank, HDFC Bank, IndusInd Bank and Bajaj Finance as collateral to raise over Rs 600 crore in loans for itself. Sebi's action against Karvy has resulted in nearly 83,000 investors getting back their securities.

On the technical front, the stock's RSI (relative strength index) stood 43.19. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.

The stock was trading below its 50-day moving average (DMA) placed at Rs 4046.88. IT was, however, trading above its 200-day moving average (DMA) placed at Rs 3394.74.

Bajaj Finance's consolidated net profit rose 63.1% to Rs 1506.29 crore on a 48% jump in total income to Rs 6322.55 in Q2 September 2019 over Q2 September 2018.

Bajaj Finance, a subsidiary of Bajaj Finserv, is a non-banking financial company (NBFC). The company deals in consumer finance, SME (Small and Medium-sized Enterprises) finance and commercial lending and wealth management.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, December 04 2019. 10:43 IST