Direct-to-home television service provider Dish TV has moved India’s securities regulator against Yes Bank for violating takeover regulations of the country while allegedly attempting to oust its board.
The bank, which owns nearly 26% of Dish TV, had sent a notice for an extraordinary general meeting (EGM) of shareholders to seek approval for its proposal to revamp the board. The EGM is scheduled for December 30.
In its complaint to the Securities Exchange Board of India (SEBI), Jawahar Goel-backed Dish TV said YES Bank violated India’s takeover regulations by not announcing an open offer while seeking to oust the board of directors.
Under Indian regulations, such a move should have triggered an open offer.
In an open offer, which is a secondary market operation, a company may offer its existing shareholders the right to buy new shares at a discount to the market price.
YES Bank, along with IDBI Trusteeship Services Ltd, owns 25.63% stake in Dish TV, which the lender acquired after invocation of pledged shares in 2020.
YES Bank did not make an open offer of shares as per law, allegedly taking the stance that it had acquired the shares pursuant to invocation of pledged shares.
Dish TV maintains that the exemption became invalid the moment the bank sent a notice in September to oust the existing board members and appoint new directors nominated by the bank as it amounts to taking control of the company.
“The company believes that the actions of YES Bank in sending the September 3 notices, September 9 notices and the EGM notice are in violation of the Takeover Regulations,” Dish TV said in its complaint to SEBI.
“If YES Bank’s proposal to appoint certain individuals to the board of the company, together with the resolution (s) proposed for removal of the existing directors (except for Anil Kumar Dua), is given effect, it shall lead to YES Bank acquiring control over the company.”
The company said the notices would have necessitated an open offer to be made by YES Bank for acquiring shares from the public shareholders. “No such public announcement has been made by YES Bank, and thus, the aforesaid notices are in violation of the Takeover Regulations.”
Dish TV said that even if YES Bank makes an open offer, there remains a possibility that the shareholding of YES Bank in the company may cross 30%, “which shall be in complete violation of Section 19 of the Banking Regulation Act, 1949 (BR Act). Section 19 of the BR Act prescribes that no banking company shall hold shares in any company, whether as pledgee, mortgagee, or absolute owner, of an amount exceeding 30 per cent of the paid-up share capital of that company or 30 per cent of its own paid-up share capital and reserves, whichever is less.”
The company has asked SEBI to investigate the actions of YES Bank in proposing the revamping of the board.
“The company further requests your good offices to issue necessary directions in the matter to YES Bank to immediately withdraw the EGM notice sent to the company and to cease and desist from taking any further actions in respect of the EGM notice and not continue the violations of the Takeover Regulations,” Dish TV said.