Business News

Mumbai: The proposed initial public offerings (IPOs) of two large non-banking financial firms-HDB Financial Services and Hero FinCorp-are facing delays in securing approvals from the country's capital markets regulator.According to sources familiar with the matter, the Securities and Exchange Board of India has held back its green light for the much-awaited public issues so far, as share sales by these companies could have inadvertently ended up violating rules that govern unlisted companies.The application for Hero FinCorp's proposed IPO has been pending with Sebi for the past eight months while HDB's application has been pending for four months.While the exact nature of the alleged breach could not be ascertained, it could have involved the pre-IPO share sales of these companies, they said.The Companies Act restricts unlisted companies from adding more than 200 shareholders in a financial year. Also, such firms cannot sell shares through private placement to over 50 persons at a time. Similarly, shares issued through private placement to public shareholders in a span of six months would be considered a public offer.Sebi did not respond to ET's queries. HDFC Bank said its subsidiary, HDB Financial Services, has filed its draft red herring prospectus with Sebi and is awaiting final observations. "We believe that there is no non-compliance," said an HDFC Bank spokesperson.119184027A Hero Fincorp spokesperson denied non-compliance with the Companies Act. "We unequivocally state that the company has not raised capital beyond the prescribed threshold of 200 investors at any time following the applicability of the Companies Act, 2013."Securities lawyers said selling by existing shareholders, which could have led to a broad-basing of the investor base in a financial year, could also be a reason.Hero FinCorp, an associate of two-wheeler major Hero MotoCorp, filed its draft red herring prospectus for its ₹3,668 crore public issue. HDB Financial submitted its draft documents for a ₹12,500 crore IPO.According to the processing status of draft offer documents on the Sebi website, comments have been sought from other regulators and government agencies for Hero FinCorp. For HDB Financial, the status indicates that the last communication was either issued or received on February 14, 2025.HDB now has more than 41,409 public shareholders. In 2024, the company issued over 1.7 million shares to employees through stock option exercises. Shares of HDB Financial are currently trading at around ₹1,050 in the unlisted market. Reserve Bank of India's guidelines require HDB Financial to be listed by September 2025 as the firm has been classified as 'upper layer' under Scale Based Regulation for NBFCs for 2024-25.Hero FinCorp had 7,452 public shareholders holding a 20.42% stake in the company as of August 2024. The company's shares are trading at ₹1,400-1,450 in the unlisted market.Lawyers said the regulator could consider easing some of these rules to allow faster listing of companies in such instances."Regulators should move towards a materiality-based approach, where companies can justify that a prior sale was not intended to circumvent IPO eligibility and still be allowed to proceed with listing," said Sonam Chandwani, managing partner, KS Legal & Associates. "The current rigid framework, while ensuring compliance, often hinders capital market access for legitimate businesses, necessitating a structured relaxation mechanism where issuers can rectify violations within a specified timeframe without outright rejection of their IPO plans."

Mumbai: IndusInd Bank has not sought any fresh capital from its promoters even though it suffered a huge loss in its net worth following an accounting discrepancy, IIHL chairman Ashok Hinduja said on Tuesday. IIHL, the investment arm of Hinduja Group, has recently got RBI's in-principle approval to raise its stake in IndusInd Bank from 16 per cent to 26 per cent. According to Hinduja, IndusInd International Holdings Ltd (IIHL) -- the Mauritius-based promoters of the private sector lender -- has committed to infuse capital into the bank in case there is a requirement. However, the bank has not sought any fresh infusion as the overall capital adequacy is at a comfortable level of over 15 per cent, he told reporters on the sideline of an event. He further said that this is an opportune time for the promoters to raise their stake given the dip in the stock price, even though it will not be so beneficial for the bank as an institution. "...at this price, we would like to. Why me? Any shareholder. See the book value, see the net worth at this value. These are panic situations. In the panic situation, everybody gets worried," Hinduja said. On March 10, IndusInd Bank disclosed that it has found some discrepancies in its derivatives portfolio, which could have an adverse impact of about 2.35 per cent of the bank's net worth as of December 2024. Analysts peg the discrepancy at Rs 2,100 crore in absolute terms. Soon after the disclosure, the bank's scrip witnessed a massive price correction. IndusInd Bank also said that an external auditor is reviewing the matter, with a report expected by the end of March 2024. Hinduja said the report by external auditor PwC will help determine who is responsible for the accounting discrepancy in the bank. He declined to comment on the reasons for the resignation of the CFO Govind Jain or why the RBI gave incumbent CEO Sumant Kathpalia an extension of only one year. The bank does not have any promoter-appointed person as a director because of a policy of the Hinduja family not to do so, he said.