Adjudication Proceedings in respect of Mr. Rana Kapoor in the matter of Yes Bank Limited

BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
[ADJUDICATION ORDER No.: ORDER/AP/AS/2020-21/9142]
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995.

In respect of:
Mr. Rana Kapoor,
PAN: AHIPK0411A
427-428, 27th Floor, Penthouse, Samudra Mahal,
Dr. Annie Besant Road, Worli,
Mumbai - 400018

In the matter of YES Bank Ltd.

1. YES Bank Limited (hereinafter referred as “YBL” or “the Company”) is a company having its securities listed on the Bombay Stock Exchange Limited (“BSE”) and National Stock Exchange Limited (“NSE”). Securities and Exchange Board of India (“SEBI”) observed that there were reports in the media related to YBL November, 2018 transactions. An extract of one such report is as follows:

“Morgan Credits Pvt. Ltd., unlisted promoter entity of Yes Bank had raised Rs. 950 Cr from Reliance Mutual Funds through unlisted Zero Coupon Non-Convertible Debentures(“ZCNCDs”) in April, 2018. As part of this transaction, the promoter i.e. Morgan Credits Pvt. Ltd. acceded to a condition that they will always maintain a cap on the borrowing cap at 0.5 X.”

2. In view of the transaction by Morgan Credits Pvt. Ltd. (“Morgan”) of raising Rs 950 crore from Reliance Mutual Fund (“RMF”) through unlisted Zero Coupon Non-Convertible Debentures (“ZCNCDs”) on April 19, 2018, SEBI undertook examination in the matter about the possible requirements of disclosure under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“the SAST Regulations”) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“the LODR Regulations”). Accordingly, vide email dated February 20, 2019, SEBI sought information/ comments from BSE and NSE with respect to aforesaid transaction. The BSE and NSE vide e-mail dated February 26, 2019 and February 27, 2019, respectively, informed that they had not received any disclosures under the LODR Regulations and the SAST Regulations from the Company or its promoters regarding the aforesaid transaction by its promoter entity. SEBI also sought comments from the Company and vide its email dated March 05, 2019, the Company informed that its promoter Morgan had raised Rs 950 crore from RMF, which was not in the in the nature of encumbrance of shares by promoters and thus, there has been no requirement of disclosures under the LODR Regulations and SAST Regulations.

3. Vide email dated March 06, 2019, the Company forwarded response of its promoter Morgan, wherein, it has been stated that Morgan is not a “group entity” of the Company and it is a part of the Promoter/ Promoter Group of the Company. Further, the Company was not privy or party to the said transaction, apparently entered between Morgan and RMF and in terms of Regulation 31 of the SAST Regulations the Company has not received any disclosure from Morgan about any encumbrance on its shareholding in the Company.

4. During the course of examination, it was observed that Mr. Rana Kapoor (hereinafter referred as “the Noticee”) has entered into an agreement with Morgan and Milestone Trusteeship Services Private Limited (“Milestone”). Accordingly, the Amended and Reinstated Debenture Trust Deed (hereinafter referred as ‘Trust Deed’) entered by the Noticee was perused and it was observed that the Noticee, then Managing Director (“MD”) and Chief Executive Officer (“CEO”) of the Company, had entered into an agreement as a “guarantor” with Morgan and Milestone as a debenture trustee with respect to said ZCNCDs. The agreement was executed on November 14, 2018 with a guarantee amount to the extent of Rs 410 Crore with respect to a total borrowing amount of Rs 950 crore. The details of the aforesaid Trust Deed agreement are as follows:

a. Morgan is an unlisted promoter entity of the Company, which issued unlisted ZCNCDs worth Rs 950 crore in April 19, 2018, and the said ZCNCDs were subscribed by Reliance Mutual Fund.

b. One of the conditions prescribed in Trust Deed of ZCNCDs was that; the borrower i.e. Morgan will always maintain a cap on the borrowing cap at 0.5 X, which means that Morgan will always maintain ownership of minimum as many shares of YBL which are worth two times the outstanding amount.

c. In respect of aforesaid agreement, the Noticee has agreed to provide a personal guarantee to the extent of Rs 410 Crore (referred to as ‘guarantee gap’ in the agreement) forming part of the guarantor’s total liability.

d. The Noticee also agreed to provide, if required under certain circumstances, such number of his shares in YBL as security for the outstanding amounts which in value are equal to two times the Guarantee Gap i.e. Rs 820 Crore.

To read more in details, find the enclosed file