Underlining YES Bank’s strong financials, its Managing Director and CEO Ravneet Gill says the 23 per cent fall in the bank’s share price on Tuesday had no correlation with the private lender’s performance. On Thursday, the YES Bank scrip closed with gains of nearly 33 per cent on the BSE. In an interview to BusinessLine , Gill said the bank is on track to raise capital and could see a significant dilution. He is also optimistic about the bank’s growth prospects and resolution of bad loans. Excerpts:

What led to the share price fall on Tuesday?

We knew the reason for the fall on October 1: the pledged shares had come into the market. The share price will recover at some point, but the concern was that depositors and clients should not draw a correlation between the share price and the bank’s core operating performance. Such anxiety can impact our liability franchise, which takes years to build. The way the share bounced back shows that people understood it was a one-off event and the bank is fundamentally sound.

Analysts say the falling share price will impact your ability to raise capital...

Typically, when the share price falls and the market capitalisation comes down, if you want to raise capital, the level of dilution goes up. Is the level of dilution a problem from the Board or the Reserve Bank of India perspective? Technically, the answer is no. But clearly, there are caps that the RBI puts on how much one individual shareholder can hold. That can become a challenge. We are talking to three sets of investors: private equity, Indian family offices, Indian and strategic investors. We think our eventual equity solution will be a combination of these.

How much of the stake would get diluted?

Let’s take a share price of about ₹50, I think the post-money dilution would be 32-33 per cent. When we brought up this issue at our last board meeting, the board was unanimous and every stakeholder was aligned to the fact that we must raise as much capital as the bank needs. We are in a silent period, and so it is difficult to give a timeline but we should have capital very soon.

YES Bank’s exposure to CG Power and Indiabulls, too, has impacted the share price...

In our fourth-quarter result, we had very clearly mentioned that Avantha Power was under stress and even though the asset was current, we had taken a 20 per cent contingency provision. So why was CG Power a surprise? The shares of CG Power were the collateral we were holding for Avantha Power. I later asked market participants why it created such an effect and they said the impression was that we had swapped debt for equity. Similarly, in terms of some of the exposures, we are not the only lenders. Other banks have also lent to them. I think the attention gets focussed on YES Bank because right now our capital buffers are not quite as thick as theirs are. I think this will change soon, when we are able to raise capital.

Investors seem to be concerned about more bad loans and resolution?

I think we need to rebuild and strengthen the trust lines. I can assure everybody that we will be totally transparent in terms of the health of our entire asset portfolio. If you go back to Q4, we had a BB and below book, and from within that we culled out a watchlist where we thought there are fears of short-term slippages. The entire watchlist was current and we still took a 20 per cent provision on that. That is the level of transparency we would like to display. We will follow very conservative accounting practices.

I think we have turned the corner. The only thing that needs to be sorted out is growth. The capital we are looking for is purely growth capital. We think the growth opportunity is great given that NBFCs right now are dislocated and public sector banks will be a little introspective in the foreseeable future due to the mergers.

How do you see your loan book growing?

We can grow all three parts of the business: retail, wholesale and transaction banking. We are a high-quality tech-enabled retail and transaction bank. In the structured finance business, we will move more from asset-backed lending to cash-flow-backed lending, but the intention is to continue to grow all three businesses. We had given an indication that by 2025 we would want 50:50 between wholesale and retail. I think we will get there a lot faster.

How does the reduction in stake of Rana Kapoor and promoter entities impact the bank?

It doesn’t impact the bank’s working. This was a forced sale and, left to him, Rana would have never sold. As it happens in the case of loan against shares, when there is a breach, the lender just sells in the market. This whole process started two weeks ago.

Has there been an erosion in the deposit base?

In an environment where every bank has said the CASA has come off, our CASA on a quarterly basis grew from 30.2 per cent to 30.8 per cent. We have worked very hard on growing our liability book and making it a lot more retail and granular. That’s a way to reduce our cost of funding. In the second quarter, we opened 1.8 lakh new accounts, the highest ever. Our new term deposits were up 39 per cent over the first quarter.

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