BSE, NSE issue notices to Bank of Rajasthan for late info

After the Jaipur Stock Exchange (JSE), the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have sent showcause notices to Bank of Rajasthan (BoR). These question the bank for the delay in informing them about BoR’s merger with ICICI Bank.

“However, there will not be any impact on BoR’s deal with ICICI Bank, as the board has approved it and all legal procedures have been followed. However, if the regulator feels, it can fine those who delayed in informing the stock exchanges,” said independent equity advisor S P Tulsian.

The JSE, through a notice on May 18, had first raised the issue of delay by BoR in informing about the deal. When asked, Puneet Jain, chairman of JSE, said the exchange had already informed the Securities and Exchange Board of India (Sebi) about the proceedings in this matter.

On May 18, the day when a memorandum of understanding (MoU) was signed between the dominant shareholders of BoR and ICICI Bank, the share price of BoR rose 20 per cent on both BSE and NSE, to Rs 99.50. Currently, the shares are trading at Rs 162.10 on BSE.

While the MoU was signed before the market opening on May 18, the stock exchanges were informed about it only around 5 pm, after the close of trading hours that day.

While both the BSE and NSE refused to issue any comments, sources confirmed both had sent a showcause notice to BoR during this week, after Sebi informally asked them to do so.

BoR’s announcement about the deal was uploaded at around 5 pm on BSE’s website.

Speaking to Business Standard, the managing director and chief executive officer of BoR, G Padmanabhan, said, “The MoU was signed between dominant shareholders of BoR and ICICI Bank. The BoR informed the stock exchanges after 4 pm, within a few minutes when it was informed about the deal by shareholders.

Whatever further finer details we have to give regarding this, we are sharing it with the stock exchanges and the regulator.” In its reply to JSE on May 19, BoR stated that “the bank received a letter at 4.30 pm from Sanjay Kumar Tayal for convening a board meeting on May 18, 2010 at 5.30 pm and the bank sent a notice to stock exchanges immediately.”

In continuation of the earlier reply, again on May 22, BoR informed JSE that “ICICI Bank vide their e-mail yesterday (on May 21) late in the evening said that the agreement between ICICI Bank and the dominant shareholder group was executed at approximately 4.30 am on May 18th, 2010.”

It is this delay of around 12 hours in informing the exchanges that is being questioned. When asked, P K Tayal (another member of the dominant shareholder family) refused to comment. The merger deal between BoR and ICICI Bank was approved by the board of BOR on May 23. There are a total of 15 directors on BoR’s board, of whom five abstained from voting — Padmanabhan, Shekhar Bhatnagar, A Madhavan, M R Vikram and V Seshadri. The dominant shareholders of BoR are the Tayal family, who hold 28.61 per cent of the equity. However, Sebi has a view that the Tayals aren’t being factual on this and actually hold over 55 per cent shares in the company and inquiries in this matter are on.