Ind-Ra downgrades long-term issuer ratings of YES Bank

With YES Bank delaying its capital-raising plans, India Ratings and Research, on Wednesday, downgraded the long-term issuer rating of the bank and kept it under Rating Negative Watch.

“India Ratings and Research has downgraded YES Bank’s long-term issuer rating to ‘IND A-’ from ‘IND A’, while maintaining it on Rating Watch Negative,” it said in a statement.

The rating agency said the downgrade reflects the continued delay and inconclusive quantum of the anticipated equity infusion in YES Bank.

“India Ratings believes this could adversely impact the bank’s franchise and potentially create challenges on the asset and liability side,” it said, while noting that the private sector lender has sizeable foreign currency liabilities and institutional deposits.

The rating agency had, on January 28, published a rating rationale and said that the rating would be reviewed in February. “India Ratings is of the view that the required capital infusion is critical for providing sufficient cushion to the possible credit cost impact from the stressed asset pool on regulatory capital requirement in the short- and medium-term, as well as for the bank’s ability to continue to serve its customers adequately,”it further said.

On February 7, YES Bank’s shareholders, in an extraordinary general meeting, gave a go-ahead to its capital-raising plans and had approved proposals to increase the authorised share capital and consequently alter the capital clause of the memorandum of association.

The bank has proposed to increase the authorised share capital to ₹1,100 crore divided into 450 crore equity shares of ₹2 each totalling ₹ 900 crore and two crore preference shares of ₹100 each amounting to ₹200 crore, but has not announced further plans on capital raising. On Wednesday, the YES Bank scrip lost 4.48 per cent and closed at ₹35.20 apiece on the BSE.