HYDERABAD: Small is big. That’s the credo Karvy Group of companies seem to have deployed for their debt binge over the past decade.
The 35-odd Karvy group companies together owe more than Rs 4,800 crore to banks and financial institutions. Of this, barring two major sums — Rs 875 crore by Karvy Stock Broking and Rs 1,780 crore taken by Karvy Innotech Ltd — much of the debt includes smaller portions of Rs 20-30 crore, with a handful going up to Rs 75-100 crore.
Karvy Innotech is the group’s IT arm and it’s likely that the said loan taken in 2017 was for business expansion, but curiously, it raised Rs 100 crore putting down a personal guarantee in December, 2019 — barely a month after Sebi imposed an interim ban on the brokerage from adding any new clients.
Brokerage is the group’s mainstay and as cash flows took a knock last year, the company struggled to survive on micro loans of as little as Rs 30 lakh taken out in February 2020.
According to company filings with the Registrar of Companies (RoC), Hyderabad, Chairman C Parthasarthy gave personal guarantees for loans worth Rs 200 crore, while Karvy Stock Broking Ltd gave corporate guarantees for an even smaller amount. Barring these, much of the debt was raised against pledge of equity shares and immovable property and chargeable assets of the companies.
Lenders allege these funds have been diverted and repayments defaulted, leading to the arrest of Karvy’s founder and self-made entrepreneur C Parthasarthy on Thursday. Banks including HDFC Bank, Axis Bank, and IndusInd Bank, have moved debt recovery tribunals and lodged complaints against the company and its promoters.
Interestingly, personal and corporate guarantees came in between June, 2020 and March 2021, perhaps under pressure from lenders to call in loans after NSE and BSE expelled the brokerage from doing business last year for misusing clients’ securities worth Rs 2,300 crore belonging to about 2.35 lakh investors.