Pomerantz Appointed Lead Counsel in HDFC Bank Securities Litigation

On December 9, 2020, U.S. District Judge Eric Komitee of the Eastern District of New York appointed Pomerantz LLP as Lead Counsel on behalf of Lead Plaintiff Meitav Dash Provident Funds and Pension Ltd. in Arora v. HDFC Bank Limited, 20-cv-4140 (E.D.N.Y.), a securities litigation being pursued on behalf of a class of defrauded investors concerning allegations that HDFC Bank Limited (“HDFC” or the “Company”) failed to disclose that the Company had ineffective controls governing its financial reporting and lending practices in its vehicle-financing operations.

HDFC is a banking and financial services company in India, offering retail and wholesale banking services including personal and vehicle financing loans. The Company is India’s largest private sector bank by assets and the largest bank by market capitalization.

The complaint alleges that, between 31 July 2019 and 10 July 2020, the defendants failed to disclose that: (i) HDFC Bank had inadequate disclosure controls and procedures and internal control over financial reporting; (ii) as a result, the Company maintained improper lending practices in its vehicle-financing operations; (iii) accordingly, earnings generated from the HFDC's vehicle-financing operations were unsustainable; and (iv) all the foregoing, once revealed, was foreseeably likely to have a material negative impact on the Company's financial condition and reputation.

On July 13, 2020, during pre-market hours, The Economic Times published an article titled “HDFC Bank probes lending practices at vehicle unit.” That article reported that HDFC had “conducted a probe into allegations of improper lending practices and conflicts of interests in its vehicle-financing operation involving the unit’s former head.”

Further, it was reported that “[t]he vehicle financing unit headed [by Ashok Khanna, Head of Retail Assets Secured Loans] had outstanding loans of more than Rs 1.2 lakh crore ($16 billion) as of March 31” and that “Khanna, who was 63 at the time of leaving the bank in March, had been due to step aside at the age of 60 but had been receiving extensions since 2017,” which “was due in part to the importance of the unit he headed, which accounts for more than 10% of the total loan book.”

On this news, HDFC Bank’s ADS price fell $1.37 per share, or 2.83%, to close at $47.02 per share on July 13, 2020.