In FY17, Karvy Consultants, the promoter company of Kargy Group, acquired the stake of ICICI Venture, even as the financials of the company started deteriorating.
On June 19 this year, media reports from Bengaluru said several investors complained to the local police about default in payment of dues from Karvy Wealth. The police had booked all the directors of KSBL including Agarwal, and directors of its subsidiary, Karvy Realty and Karvy Capital. The complainants told police that there are several other investors who were duped by the company and they did not receive any returns since 2017. The instruments offered to the complainants offered 18-20 per cent returns.
In a statement, Karvy denied the charges made by the investors and said these complainants had invested in high yield-high risk investments and it did not mislead any customer.
Meanwhile, on November 22, Sebi
accused KSBL of diverting Rs 1,100 crore from the company to a real estate subsidiary and of pledging the clients shares to raise funds from lenders. Sebi
also banned Karvy from acquiring new clients for its stockbroking business.
Indian lenders, which have an exposure of Rs 2,900 crore in Karvy group companies, are taking legal advice on how to enforce the collateral taken from Karvy.
Karvy has denied the charges made by the Sebi and said it has the right to respond to each preliminary observation made by Sebi within 21 days and is thus only a temporary order restraining some actions until December 16, 2019, when it will represent its position to Sebi.
The company has also not issued any financial details to the ratings firm and on Wednesday, rating firm ICRA downgraded the company citing lack of information from the company.