board had approved the acquisition of Blinkit for Rs 4,447 crore. The investors said they had suffered losses as a result of the delay and that timely disclosure would have helped them be better prepared.
The investors said in a June 29 letter to the Sebi chairman that news about the potential acquisition had been reported in the press and was doing the rounds on social media for more than a month before the deal was announced. But Zomato, they alleged, neither confirmed nor denied the reports. Zomato shares have plummeted 20% since the announcement of the deal on June 24 after market hours. ET could not ascertain the identity of the investors or verify their holdings in Zomato.
Sebi didn’t respond to queries.
The company said the disclosure was timely, in accordance with the rules.
“Zomato has complied with applicable laws and relevant Sebi guidelines and made necessary disclosures upon the approval of the transaction by the board and signing of the definitive agreements,” Zomato told ET in response to queries.
Sebi norms require listed companies to disclose any price-sensitive information without delay. However, company boards have the liberty to decide whether a development is price-sensitive information and, if it is, at what juncture it needs to be disclosed.
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“These investors alleged that the company did not make any comments on the deal. However, some of the more savvy investors adjusted their exposure to Zomato right when the social media chatter started coming in,” said a person with knowledge of the matter. “They have also cited a recent Sebi order where a blue-chip company and its employees were penalised for similar violations.”
The investors also referred to a stock market disclosure made by Zomato in the early hours of the day of the board meeting. “Even in this disclosure they did not mention any specifics of the deal,” said the person.
According to the BSE, Zomato made a disclosure at 12:03 am on June 24 informing its investors that the board will take up an acquisition-related matter in the morning without naming Blinkit.
“Pursuant to Regulation 29 of Listing Regulations, as amended, this is to inform you that a meeting of the board of directors of Zomato Limited (“the Company”) is scheduled to be held on Friday, June 24, 2022, to discuss a potential acquisition transaction by the Company, the consideration for which may be discharged through issuance of equity shares of the Company by way of a preferential issue,” that disclosure had said.
Sebi’s insider trading rules state that any price-sensitive information must be disclosed in a timely manner to investors. If such information is available in the public domain through news reports or social media, the listed entity is obliged to confirm or deny this, lawyers said. This is aimed at ensuring information symmetry and avoiding any knee-jerk reaction in the stock.
“The current scenario the matter may be open to interpretation. (The) company can take a view that it did not disclose the acquisition until the deal attained eventuality and if it had disclosed earlier, it may have created a false market,” said a leading securities lawyer aware of the development.
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