EXECUTIVE SUMMARY. April 1, 2020, All Fools Day, the first day of FY2021, was an eventful day for Kotak Mahindra Bank (KMB) shareholders, as the share price fell an alarming 9% as compared with a NIFTY-50 decline of 4% and the NIFTY Bank fall of 5%. What should be of interest, though, to the Securities and Exchange Board of India (SEBI) is the bank’s March 31 conference call organised by BOB Capital Markets with select undisclosed capital market participants. In this call, according to media reports (here and here), apparently market sensitive information was given by unnamed senior bank officials, and the participants concluded that the future outlook for the bank was bleak. What is worse is that the bank did not upload the audio recording of the call, nor did it disclose the transcript, and hence what exactly transpired is only known to the favoured few participants who were invited on the call and probably benefitted from the selective disclosure.
While it is also possible that the share price decline could have been on account of MSCI deferring the sectoral limits for Indian securities, it was irresponsible of KMB to have not disclosed the contents of the call to the exchanges, especially when only select invitees participated in the call. KMB is a prominent private sector bank, and Uday Kotak, its founder-CEO, chaired the SEBI-appointed Committee on Corporate Governance in 2017. Despite my reminders, both KMB and BOB Capital Markets have refused to disclose to the public the contents and the identities of the participants on this important call. Such behaviour may undermine confidence, especially at a time when markets globally are under considerable pressure and the capital markets regulator needs to investigate such conduct.
Always held that India & Insider Trading are Inseparable…These privately organised interactions between Companies and selective investors are nothing but disguised breeding grounds for insider moves…KMB did notify the Exchanges on March 31,2020 that their reps had interacted with investors through concalls on March 30 & 31 organised by DSP Merill Lynch & BOB Capital Markets respectively …it must be made imperative to immediately release in the public domain the full transcripts and list of participants of such privately arranged interactions for the sake of transperancy and disclosure and to confirm there was nothing insider or sensitive info conveyed to just a select few… Selective Dissemination & Non Disclosure of sensitive info is a serious violation of Insider Regulations and Listing Agreements & the Exchanges & the regulator SEBI need to call for records from the Concall organisers & KMB to check if those who were selectively privy to or participated in KMB’s concalls as above were sellers of KMB subsequently…thus two possible violations need to be investigated,first selective dissemination & non disclosure & second if such info was insider in nature & acted on too today…as you opine the price fall could have been for other reasons …but any prior unfavorable sensitive insider info lends assurance and confidence to those who are privy to it ,pushing them to thus act to benefit from it…they would not otherwise act immediately post concall… appreciate HH that you raised an issue on this…in such treacherous markets we need to go beyond bring watchdogs & be bloodhounds…Cheers,Gaurav