Funds raised from the bidding will be used for the settlement of claims of Karvy investors
Finally, the long waiting for the investors and clients of the Karvy Stock Broking Limited (Karvy) has come to an end. After the capital market regulator Securities and Exchange Board of India (Sebi) barred Karvy from the capital market in December 2019, investors associated with the debarred broking firm having trading and demat accounts were left in the lurch. The demat and trading accounts of Karvy will now be transferred to IIFL Securities (IIFL) and Axis Securities Limited (ASL) respectively.
Earlier this year, on February 6, National Securities Depository Limited (NSDL) and Central Security Depository Limited (CDSL) along with three Stock Exchanges (SEs) namely; BSE, NSE, and Metropolitan Stock Exchange (MSE) had said that trading, as well as demat accounts held by Karvy, will be transferred to another member or participant through a formal bidding process on the basis of laid down eligibility criteria.
This was for the first time in India, SEs and depositories have decided to sell the assets of a stockbroker to settle the dues of broker’s clients and called for bids.
In accordance with the above, IIFL Securities had participated in the formal bidding process for the transfer of demat accounts held by Karvy. Similarly, ASL has emerged as the successful bidder for Trading accounts (broking accounts) held by Karvy with NSE, BSE, and MSE.
"This is to inform you that IIFL Securities Ltd. has emerged as the successful bidder for demat accounts held by Karvy with NSDL and CDSL. The said transfer of demat accounts is subject to the remittance of the bid amount and submission of the necessary documents in relation thereto," IIFL said in a stock filing.
IIFL Securities will get 11 lakh demat accounts with a custody value of Rs 3.01 lakh crore as of January 31, 2021, while Axis Securities will have access to 11 lakh more clients and its customer base will surge from 25 lakh to over 36 lakh.
After the acquisition of Karvy’s demat accounts by IIFL Securities, the combined accounts will become 13.83 lakhs, the third largest broker in India after Zerodha, Upstox. Currently, discount broking firm Zerodha is the topmost stockbroker with 31.43 lakh demat account followed by Upstox which has 18.53 lakh accounts. ICICI Securities and Angel Broking held 13.47 lakh and 13.25 lakh demat accounts.
The funds raised from the bidding shall be used for the settlement of claims of investors of Karvy, after recovering the outstanding dues of Market Infrastructure Institutions (MIIs).
Since December 2019, Karvy Stock Broking’s trading terminals on NSE and BSE were closed under Sebi orders, which had left a large number of the brokers’ clients without any access to funds, securities, or both, which were in the custody of the broker then. The NSE last year November said that they have paid Rs 2,300 crore to 2.35 lakh investors of Karvy Stock Broking as a part of a settlement.
“In mutual consultation with stock exchanges and other depositories, it has been decided that the trading as well the demat accounts held by Karvy shall be transferred to another Member through a formal bidding process. Interested Participant(s), having inter alia satisfactory compliance & governance credentials, adequate net worth and nationwide presence shall submit their bids for acquiring the demat accounts,” said a circular by NSDL.
ASL in a statement said, “This transfer will help broking clients of Karvy to continue access to the securities market. They will be able to take the benefit of the company’s robust trading platform and avail various products and services currently enjoyed by more than 2.4 million customers”.