How Yes Bank has been searching for an investor

The inability of Yes Bank to raise capital over at least eight months and concerns over its corporate exposure and stressed assets was one of the main reasons for the Reserve Bank of India (RBI) and government to take action in the late night developments on Thursday.

Yes Bank scrip fell by nearly 20 per cent in early morning trade on BSE on Friday.

The private sector lender has been in talks with investors since July last year. It had raised ₹1,930 crore through QIP in August 2019 and had been looking to raise anywhere between $1.2 billion and $ 2 billion since then.

In an announcement late November, it had said it would raise about $2 billion dollar through preferential allotment of shares. At the time, it had said that Canadian billionaire Erwin Singh Braich or SPGP Holdings is interested in buying $1.2 billion while other interested investors include GMR Group and Associates, which wants to invest $50 million, Aditya Birla Family Office and Rekha Jhunjhunwala who are keen to pledge $25 million each.

These however, did not go through and the bank was looking for fresh investors.

The board of directors of Yes Bank had in a meeting on January 10 outlined a modified capital raising plan where it intends to raise up to ₹10,000 crore through a mixture of equity and debt. It had called an EGM on February 7 to approve a fresh proposal to authorise capital raising through issuance of equity shares or other convertible securities.

Announcing a delay in its third quarter results, private sector lender Yes Bank had then in February announced that it has received non-binding expressions of interest (EOI) from several prominent investors including JC Flowers & Co; Tilden Park Capital Management LP; OHA (UK) LLP (part of Oak Hill Advisors) and Silver Point Capital. However, till date no further announcement was forthcoming from the lender.

Meanwhile, the bank’s total capital adequacy ratio kept coming down steadily. Its core capital or CET 1 is currently at 8.7 per cent as against the regulatory requirement of 8 per cent. Its deposits had fallen in the second quarter of the fiscal by 6 per cent to ₹2.09 lakh crore as against ₹2.22 lakh crore in the same period a year ago.

Analysts had also pointed out erosion in its deposit base, and were concerned about its exposure to certain corporate accounts. “In addition to the CET1 being lower than most private sector banks (the median of about 12 per cent for private banks rated ‘IND A+’ and above), it is accompanied by lower provisions on large corporate exposures and stressed book that is almost 1.5x its GNPAs (at end-September 2019, adjusted for divergence on FY19 numbers, the portion of the loan book rated ‘BB’ and below amounted to ₹300 billion and gross NPAs amounted to ₹200 billion), India Ratings had said in a downgrade of Yes Bank’s long term issuer ratings on February 12.

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