IndusInd's Accounting Lapse to Delay Hinduja's Invesco AMC Takeover Bid

As accounting lapses at IndusInd Bank gradually come to light, its parent firm, IndusInd International Holdings Limited (IIHL), may now face delays in its plans. The Mauritius-listed company is awaiting sponsor approval from the Securities and Exchange Board of India (SEBI) for its proposed takeover of Invesco Asset Management (India) Private Limited.

However, a report by Moneycontrol suggests that the market regulator may postpone the approval as investigations into IndusInd Bank’s accounting irregularities continue. IIHL first announced its intention to acquire a 60% stake in Invesco Asset Management (India) Private Limited and Invesco Trustee Private Limited in April 2024. Under the deal, US-based investment manager Invesco Ltd would retain the remaining 40% stake in the mutual fund operator.

The acquisition has already received clearance from the Competition Commission of India (CCI), as well as in-principle approval from SEBI. According to SEBI regulations, entities launching or acquiring a significant stake in a mutual fund company may require sponsor or promoter approval — particularly in cases involving a change in control or substantial shareholding.

A sponsor is responsible for all the steps involved in setting up and registering a mutual fund with SEBI, including establishing a mutual fund trust under the Indian Trusts Act, 1882, and incorporating both the Asset Management Company (AMC) and the trustee company in line with SEBI’s in-principle conditions.

Sponsor approvals generally take three to six months from the time of in-principle clearance. In IIHL’s case, final approval was originally anticipated by April this year.

Why is SEBI concerned?

According to the report, SEBI has asked IIHL to provide details on how it plans to fund the Invesco acquisition. Specifically, the regulator wants to know whether the Hinduja Group’s financial services arm will use internal equity or borrow capital to finance the deal.

SEBI has also asked whether IIHL has entered into any arrangements with banks that involve pledging Invesco’s shares as collateral. The regulator is cautious about a repeat of the Reliance Capital episode, where the Hinduja Group relied heavily on debt and pledged shares of its investment companies to complete the transaction.

Moreover, SEBI is reportedly reviewing the broader situation at IndusInd Bank. A banker involved in the deal told the publication that the outcome of ongoing investigations at the bank could significantly affect the regulator’s decision regarding sponsor approval for IIHL.

For context, IIHL is the principal promoter of IndusInd Bank, holding a 12.06% stake. As per March 2025 shareholding data, 35.5% of this stake has been pledged.

Insider Trading Allegations

Meanwhile, a separate report by Reuters claimed that SEBI is probing six IndusInd Bank officials for alleged insider trading. The investigation aims to determine whether they sold employee stock options while being aware of accounting lapses that were not yet disclosed to the public.

These trades may have breached SEBI regulations and the bank's internal code, the news agency noted. Adding that the inquiry is still in early stages, and no show-cause notices have been issued.

The lapses had created at Rs 1,979 crore gap in the bank’s balance sheet, leading to the resignations of its top two executives. SEBI is also reviewing delays in disclosure of the accounting issues, the report added.