KOCHI: Did Yes Bank take the market regulator too lightly when it responded to the stock exchanges on May 6, denying knowledge of any potential deal with Japan’s Sumitomo Mitsui Banking Corporation (SMBC)?
The Securities and Exchange Board of India (Sebi) is now probing whether the bank’s disclosures were misleading or in breach of listing norms, sources aware of the development said.
Yes Bank’s May 6 response (disclosure) came after media reports suggested that SMBC was in advanced talks to acquire a significant stake in Yes Bank.
The lender dismissed the reports as “speculative” and “not factually correct,” saying it wasn’t aware of any such information requiring disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
But just three days later, on May 9, Yes Bank announced that it had signed a share purchase agreement with SMBC. The deal involves SMBC acquiring a 20 per cent stake in the bank from existing investors, including State Bank of India (SBI), HDFC Bank, ICICI Bank, and Kotak Mahindra Bank.
The Japanese lender will buy over 413 crore shares from SBI alone, amounting to a 13.9 per cent stake. Other banks are selling smaller portions.
Sebi is now examining whether the deal was already in an advanced stage by May 6 itself and if Yes Bank’s denial to regulator’s query on the matter amounted to misleading investors on the deal.
“The share purchase agreement was signed within three days, indicating that discussions were likely far along. Under Sebi’s market rumour verification norms, such information is considered material and price-sensitive, and must be disclosed properly and truthfully,” said a source familiar with the regulatory thinking.
Yes Bank shares had surged 9 per cent on May 6 following the media reports, and have gained nearly 15 per cent since the formal deal announcement on May 9.
Yes Bank share gained 3% on Thursday
On May 15, the stock closed at Rs21.53 on NSE, after gaining around 3 per cent from the previous close.
Market watchers point out that investment bankers and legal advisers often err on the side of caution when advising clients on disclosures.
“There’s a thin line between preliminary talks and advanced negotiations. The key question is – what was the actual status of the deal on May 6?” said another person close to the developments.
As of March 31, domestic lenders collectively held 33.7 per cent in Yes Bank, with SBI alone holding nearly 24 per cent. Foreign investors CA Basque Investments and Verventa Holdings held 6.8 per cent and 9.2 per cent, respectively.
The bank also has a massive retail base, with nearly 63 lakh individual investors.
The episode draws renewed attention to the legacy of Yes Bank’s governance troubles. The bank was placed under RBI supervision in March 2020 after concerns over its financial health under founder Rana Kapoor, who was later arrested and remains out on bail.
