Money & Banking

How Yes Bank has been searching for an investor

Surabhi Mumbai | Updated on March 06, 2020 Published on March 06, 2020

Yes Bank scrips fall over 20% in early trade. File Photo   -  Reuters

Scrip falls nearly 20 per cent

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.

Published on March 06, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.