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.