YES Bank will remain YES Bank, no need for any re-branding: Prashant Kumar, MD & CEO

Hamsini Karthik | | Updated on: Aug 03, 2022
Prashant Kumar, Chief Executive Officer of Yes Bank Ltd

Prashant Kumar, Chief Executive Officer of Yes Bank Ltd

In an interview with BusinessLine, Prashant Kumar presses on the significance of the bank’s growth, but does not believe in race game

A big book of Bhagavad Gita with English translation and interpretation and an artistic gold-plated bookmark is the unmissable addition to the sprawling corner room of Prashant Kumar, MD and CEO of YES Bank. Having accomplished the key targets ahead of schedule, Kumar is finding time for the Gita. In an exclusive chat with Business Line, he says Carlyle and Advent’s entry could help place the bank at par with larger peers over time. Edited excerpts:

Do you feel mission accomplished?

I felt that way when we came out of restructuring. But this is a very important piece to me. It’s a new journey which has now started with everything in place. But it’s not just about money coming in; it’s about large key investors believing in our franchise. At ₹9,000 crore, our capital adequacy would be at par with large private banks. Two things are validations here. An ARC giving a valuation of 135% to our assets, which means that more provisions than what was required has been taken and there is room for better recovery now. Similarly, the people who are putting in equity in the bank believe that this franchise can give returns much more that what we think.

You call it the confidence capital. Have you spotted avenues for deployment?

This will take care of our medium to long-term needs. Now that we’ve come out of the restructuring scheme, we need to be at par with the private sector and capital is one ratio which is very important not only in terms of how you are being placed in the system but also the how the rating agencies also see you. We see this a re-rating event, and this could open up a lot of business opportunities from large corporates, public sector entities and the government, who would otherwise not want to deal with a bank where the rating is weak.

Is any lock-in attached to new shareholders ?

Lock-in is as per SEBI formula for fresh issuance which is six months.

But they wouldn’t end up being like Tilden Park which exited the bank soon after the lock in was removed in 2020?

Tilden Park isn’t a private equity, they are more into stressed assets. Tilden Park was looking at us as a bank under distress and how they can approach it. But they are not very large and their thought process is different. Whereas Carlyle and Advent have always been long-term investors and are not stressed assets investors. They are growth oriented. So, timing and style is different.

Would SBI’s holding in YES Bank change now?

SBI Chairman has said in the past that they are in no hurry to exit the investment in YES Bank. After this round of equity infusion, SBI’s stake will come to 26.1 per cent and it must hold 26 per cent till March 2023 as per the reconstruction scheme. That’s why the structure in our capital raise is a mix of equity and warrants which will be exercised post March 2023. After exercising warrants, SBI’s stake will be 24 per cent.

The word is that Aditya Puri is stepping in as Carlyle’s representation on the bank’s board...

We don’t know who will be Carlyle’s nominee. It will have to be approved by the shareholders and the nominee’s right to have a board seat will have to be approved by the RBI and then we will have the process of picking a person. We are not particular on any name; neither is Carlyle

Would you call it a new YES Bank now?

Very much and right from March 2020, there is a change in thought process, culture, and governance. YES Bank was a large financial institution put under reconstruction and it has successfully exited the scheme. We came up with solutions for resolution of large stressed assets and capital. I think we have been able to take care of all the requirements around the soundness of entity and this is the beginning.

Will the new YES Bank have a new identity; don’t you have to carry the legacy baggage?

No, we don’t carry anything to do with the past. Our understanding is that there is nothing negative about the brand and this is the feedback from all stakeholders - customers shareholders, outsiders, equity holders. YES Bank will remain YES Bank and that’s the thought process.

With new set of investors coming in, isn’t it not punishing on the shareholders to still impose the embargo till March 2023?

When the scheme was put to effect, the expectation was that it would take minimum three years for the bank to come out of reconstruction. But due credit to everybody in the bank, we’ve been able to come out in just two years. But we cannot change the reconstruction scheme which is a notification from government and changing the scheme takes its own time. I don’t think we are putting anyone at a disadvantage because by March 2023 they would get much better returns.

But fund infusion is returns dilutive…

There are two things. There is no dilution to the book value because fresh funds are coming at a higher price (₹13.78 a share). Mathematically, there be a dilution of ROE. But if you see the possible upsides, in terms of rerating and the levers of opportunity, that will neutralize any technical dilution to ROE.

When YES Bank was placed under reconstruction it was the fourth largest bank. Today it has slipped to the sixth. Does it bother you?

We are not into any race, and we aren’t doing what we are to get to the fourth place or so. Our objective is to ensure that we can be seen as more friendly to customers and as responsible in the system. In terms of growth, we would like to grow faster than the system but at the same time, be very transparent. There should be total confidence in the trust of the customers. We also need to be careful of what is happening in the ecosystem, and we will unnecessarily take any risk just to play the league table. We are not in a hurry and have lots of patience.

Published on August 02, 2022
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