Shares of HDFC Bank Ltd. fell as much as 1.15% in early trade on July 24 after multiple US law firms launched investigations into whether the private sector lender may have violated federal securities laws, weighing on investor sentiment.
The decline followed weakness in the bank's American Depositary Receipts (ADRs) overnight, which fell as much as 1.5% to $22.66 before trimming losses.
The investigations are being led by Glancy Prongay Wolke & Rotter, alongside the Law Offices of Frank R. Cruz and Howard G. Smith. The firms said they are examining whether HDFC Bank made materially misleading statements or failed to adequately disclose information relevant to US investors.
The probes stem from recent reports by The Indian Express, which alleged that HDFC Bank made undisclosed financial payments to the Maharashtra State Road Development Corporation (MSRDC) to attract large institutional deposits. According to the reports, the payments were allegedly recorded as marketing expenses rather than conventional banking payouts.
The US law firms have invited investors who suffered losses while trading HDFC Bank ADRs to share information and relevant documents as part of their investigations. The information gathered will help determine whether a securities class action lawsuit should be filed against the bank.
Importantly, no class action lawsuit has been filed against HDFC Bank at this stage. The ongoing investigations are preliminary and are intended to assess whether sufficient grounds exist for legal action.
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