SEBI probes BAO funds over alleged 10% limit breach in Lerthai Finance

This order addresses allegations that three foreign portfolio investment funds (BAO Value Fund, Sparrow Asia Diversified Opportunities Fund, and Davos International Fund) breached the 10% investment limit in the paid-up equity capital of Lerthai Finance Limited by holding shares through multiple investor groups.

Who it concerns: BAO Value Fund, Sparrow Asia Diversified Opportunities Fund, Davos International Fund, Lerthai Finance Limited, BAO Ltd. Group, ICICI Bank Ltd., National Securities Depository Limited (NSDL)

What SEBI found or ordered

• SEBI alleged violations of the FPI Regulations 2014 and 2019 regarding investment limits and beneficial ownership declarations.
• NSDL identified that the combined holdings of the noticees in Lerthai Finance Limited breached the 10% paid-up equity capital limit.
• ICICI Bank Ltd. (Designated Depository Participant) observed a common Ultimate Beneficial Owner (Valentina Katherine Agarwal) for BAO Value Fund and Sparrow Asia Diversified Opportunities Fund.
• A Show Cause Notice was issued on June 29, 2026, alleging non-compliance with regulations 22, 23, and 24 of the FPI Regulations.
• The order examines the grouping of these funds under Investor Group N1001222 and other groups (N1001548, N1001537) as reported by NSDL.

Also in the document

• The investigation involves cross-border entities, including funds registered in different jurisdictions and managed by entities like BAO Asset Managers Ltd. and Sparrow Investment Managers Ltd.
• The total assets under management (AUC) for the involved funds are significant, with Sparrow Asia Diversified Opportunities Fund holding approximately Rs. 482.53 Crore and BAO Value Fund holding approximately Rs. 143.45 Crore as of February 2026.
• SEBI noted that one of the investor groups (N1001548) was de-clubbed by ICICI Bank in May 2024, while another (N1001537) was de-clubbed in August 2024, but group N1001222 remained active.