Fortis: YES Bank now on SEBI radar

PALAK SHAH Mumbai | Updated on May 21, 2018

For delayed disclosure of invocation of promoters’ share pledge, stake sale

The Fortis deal saga has a new twist. YES Bank, India’s fourth-largest bank, which holds a little over 15 per cent of Fortis Healthcare (FHL), now finds itself in the dock. The lender is under the scanner of market regulator SEBI for its failure to make a timely disclosure of the invocation of share pledge of erstwhile Fortis promoters, the Singh brothers, and the part-sale of FHL shares in the open market.

YES Bank delayed the disclosure of the invocation of the share pledge by nearly a month, and during this time, it also sold a large number of shares in the open market, which is now being probed by SEBI, a source close to the development told BusinessLine.

YES Bank acquired 90 million shares, or 17.31 per cent stake in FHL, on February 16 by invoking the pledge on shares placed with it by Fortis founders Shivinder and Malvinder Singh. Of the total shares it held, the bank sold 11.2 million shares, or 2.11 per cent stake in FHL, in the open market between February 23 and March 15. But the disclosure that it had invoked the pledge of the Singh brothers in FHL came only on March 13.

In these 20 days — from the time it started offloading shares in the market to the day the disclosure came — YES Bank sold a large portion of the 2.11 per cent stake in FHL.

The delay in the disclosure goes against SEBI’s Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011, experts say.

Replying to an e-mail query on the issue, a spokesperson for the bank said, “As a policy, YES Bank does not comment on company-specific information.”

Under clause 29 of SEBI’s SAST Regulations, YES Bank was required to make the disclosure about of its acquisition of 17.31 per cent stake in FHL via the pledge invocation within two days of the deal.

Since the bank did not make this disclosure, it could have taken advantage of the stable share price while offloading the shares, experts said. Usually, when the lender invokes a promoter pledge in any company, the share price sees high volatility on anticipation among traders.

This is not the first time that YES Bank has come under a regulatory cloud for disclosure-related issues. In 2016, a SEBI probe reportedly found that the bank did not inform the exchanges about its fund-raising via QIP in accordance with listing obligation and disclosure norms.

The YES Bank stock had surged ahead of the date on which it said it would be launching its QIP; however, the QIP was later withdrawn.

Last week, SEBI pulled up scam-hit Punjab National Bank for a six-day delay in disclosing the letter of credit it had issued to a Mehul Choksi firm.

YES Bank currently holds 15.21 per cent stake in FHL, which has been witnessing a bidding war for acquisition in the past 18 months. By virtue of being the largest shareholder in FHL, YES Bank’s vote in favour or against a bid could swing the deal either way.

SEBI did not reply to an e-mailed query on the issue.

Published on May 21, 2018

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