US-based global investor rights law company Rosen Law Firm has announced a lawsuit on behalf of shareholders of HDFC Bank Limited following allegations against the bank of issuing "materially misleading business information" to investors.
Rosen Law, Firm, in a press release issued on Sunday, said it is preparing a securities lawsuit. "If you purchased securities of HDFC Bank please visit the firm's website at rosenlegal.com/cases-register-1922 to join the securities action," the firm added.
The development comes days after it was reported on July 13 that HDFC Bank had conducted an investigation into the "improper lending practices and conflicts of interests" in its vehicle-financing arm.
The probe found that lender's car loan customers were given GPS devices by bundling them in auto loans without their knowledge, thereby violating the guidelines prohibiting them to indulge in non-financial businesses.
With regard to the probe, HDFC Bank has fired at least six senior and mid-level officials. Some employees of auto loan unit allegedly breached the code of conduct and governance rules and indulged in corrupt practices, following which they were sacked by the bank's unit.
As per the allegations, these executives sold the GPS devices with auto loans to achieve sales targets from the years 2015 to 2019, and allegedly to track customers in case of loan default.
Following these reports, HDFC Bank's American depositary receipt price had fallen $1.37 per share, or 2.83%, to close at $47.02 per share on July 13, 2020.
On July 19, 2020, HDFC Bank reported its financial results for the first quarter of the fiscal year, missing analyst estimates with respect to net profit and reporting a deterioration in its asset quality, the law firm said.
In July 2020, Experian Plc's Indian unit had informed the Reserve Bank of India that "HDFC Bank has been late in providing details of its loans, including the repayment status of its millions of retail borrowers" and that "[s]uch tardiness has been an issue for about two years."
Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation.
The vehicle financing unit of HDFC Bank has total outstanding loans of Rs 1.2 lakh crore as of March 31, 2020.
Meanwhile, HDFC Bank's shares were trading Rs -1.10 or 0.13 per cent down at Rs 1,033.05 on Monday, compared to its previous day close of Rs 1,034.45 on the National Stock Exchange (NSE).
Last year, Rosen Law firm had initiated a class-action lawsuit against tech service giant Infosys. The action was taken after a whistleblower group alleged that Infosys top management had been involved in "unethical practices" to boost the company's revenue and profits.
Meanwhile, HDFC in a statement has said it's "unaware of any such development (class action lawsuit) till we heard about it from the media". "We are getting details of it. We'll examine it and respond to it as appropriate. Prima facie it does look frivolous as we believe we have been transparent in our disclosures," the company said.