The Karvy Stock Broking scandal has caused a flutter among a much larger base of investors than those who are directly their stock broking clients.
Mutual fund investors are understandably assuming that Karvy Fintech, which provides the registrar and transfer agency (RTA) services to 24 mutual fund houses and a large number of listed companies is related to the scam-tainted broking company. The good news for investors is that this is not true. The two companies used to be group companies but are not connected now. Karvy Fintech is now owned by General Atlantic. In fact, a name change is in the offing.
For the uninitiated, an RTA is a service provider which processes all sorts of investor-related transactions on behalf of mutual funds and listed companies, including sale and purchase of units, processing of dividend payments, maintaining an updated record of their bank account details, addresses, emails, etc.
To get a perspective of the scale of Karvy Fintech's operations, they provide the RTA services for around 9 crore folios, split roughly equally between mutual fund and stock investors. Across the 24 AMCs they service, they have around Rs 7 lakh crore of mutual fund assets under their coverage.
With the scale of misappropriation charges leveled against Karvy's stock broking unit, it is natural for the clients of their RTA services (and, in turn, their investors) to worry about safety of their investments.
We spoke to V. Ganesh, the MD and CEO of Karvy Fintech, to figure things out. He assured us that there is absolutely no reason to worry as there is no impact on their business operations resulting from the developments at Karvy Stock Broking. Also, there are no common directors between Karvy Fintech and other group companies.
What's noteworthy also is the fact that while the company continues to use the Karvy name, it is actually majority owned by General Atlantic Singapore Fund Pte. Ltd., an investment vehicle of General Atlantic of the US. By owning 83.25% of Karvy Fintech's shares, General Atlantinc controls the company. C. Parthasarathy of the Karvy Group owns the remaining shares, but has resigned from the board of Karvy Fintech and is not involved in running the company.