Market regulator the Securities and Exchange board of India (Sebi) is probing disclosures made by Yes Bank in connection with the ongoing share sale to Japanese lender Sumitomo Mitsui Banking Corporation (SMBC), people with direct knowledge of the matter said.
The disclosure in question is the May 6 response Yes Bank offered to stock exchanges regarding media reports on a possible deal with SMBC.
The stock had surged 9 percent after reports in a section of media indicated a deal between Yes Bank and SMBC, the sources said.
In response to the query, Yes Bank termed the reports on discussions between Yes Bank and SMBC as “speculative” and “not factually correct”. The banks said it was not aware of any information regarding the deal.
“The bank is on a growth trajectory and routinely explores opportunities with various stakeholders, which are aimed at enhancing shareholder value. However, such discussions are preliminary and do not warrant a disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, at this stage,” the company said in a May 6 exchange filing.
On May 9, Yes Bank said disclosed the Mumbai-based leader and the investors — State Bank of India and a number of other banks — had signed a share purchase agreement with SMBC, wherein the Japanese company would buy a 20 percent stake from various shareholders.
Mails sent to Yes Bank and Sebi remained unanswered at the time of publishing this article.
“Sebi’s market rumour verification rules mandate true disclosure of the ongoing deals. The share purchase agreement was signed within three days of the Yes Bank response giving an indication that the deal was in advanced stage on May 6,” said a person with direct knowledge of the matter. “However, investment bankers and legal advisers handling the deals generally advise against premature disclosure of deals. One needs to examine what was the status of the deal as on May 6.”
According to the May 9 disclosure, SMBC would buy more than 413 crore shares, representing 13.9 percent of the company’s total share base, from SBI.
Other shareholders, too, agreed to sell their shares to SMBC. HDFC Bank was to sell a 1.9 percent stake in the bank and ICICI Bank and Kotak Mahindra Bank 1.7 and 0.8 percent, according to disclosures.
Another person said the information regarding the deal was clearly price sensitive. “Yes Bank shares have soared nearly 15 percent since May 9, indicating the information was materially price sensitive. All the standard disclosure protocols of Sebi needs to be followed in this regard,” the person cited above said.
As on March 31, domestic lenders together owned 33.7 percent in Yes Bank. SBI was the largest holder with a 23.97 percent stake. Foreign investors CA Basque Investments and Verventa Holdings owned 6.8 percent and 9.2 percent, respectively. The bank also has nearly 63 lakh retail investors.
In March 2020, the Reserve Bank of India (RBI) took the decision to supersede Yes Bank’s board in March 2020 amid concerns about deterioration of the bank’s financial health and potential mismanagement by Rana Kapoor, the bank’s founder.
Following this, lenders, including SBI and HDFC Bank, purchased Yes Bank shares. Kapoor was subsequently arrested. He is now out on bail, awaiting trial.
At 2.14 pm, the Yes Bank stock was trading at Rs 21.54 on the National Stock Exchange, up 3 percent from the previous close.
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