Yes Bank eyes bigger share sale

MUMBAI: Yes Bank is looking at expanding its capital base by over 10% through the issue of fresh equity under the private placement route. The bank is looking to bring in a new investor with over 5% stake and a board seat which will require the approval of the RBI.


US private equity giant

TPG

,

Advent International

and a couple of sovereign wealth funds are in discussions to buy into the Indian private bank, which has seen its market value halve since March, a slide prompted by a spate of bad loan exposures. Yes Bank board had already approved a $1-billion equity capital raising even as its market capitalisation hovers around $5 billion, or over Rs 32,000 crore.

The bank is looking at doing a repeat of what Axis Bank did in 2017 by raising close to Rs 11,626 crore by selling shares to investors, including Bain Capital and Life Insurance Corporation (LIC). Bain had formed a consortium with its global sponsors, which are mostly sovereign wealth and pension funds.

Any private equity investor coming into Yes Bank too is expected to follow a similar path. Yes Bank has had discussions with other bulge bracket investors like

Blackstone

and

KKR

too, with some of them seeking well in excess of 10% holding and a role in steering it. The RBI typically allows investors to hold only 5% but does make exceptions. A notable one was for Catholic Syrian Bank, where Canadian investor Prem Watsa’s Fairfax group was given an in-principal nod to hold 51% in the bank.

Sources said that the capital raising would serve two purposes. First, it will act as ‘confidence capital’ by raising the capital adequacy ratio (currently at 16.5%) much above statutory requirement. Second, the presence of a global investor on the board would reassure investors on governance. The bank is understood to have told investors that it would continue to focus on corporate banking but would shift from structured products to cash-flow based financing. Yes Bank had recently seen a leadership transition with

Deutsche Bank

’s former India CEO Ravneet Gill stepping into the shoes of promoter-CEO Rana Kapoor. Gill, who took charge in March, signed off the results reporting a Q4 loss of Rs 1,507 crore. The bank had said that the loss was on account of provisioning towards some large loans which turned bad. These accounts are believed to be of Reliance ADAG, Jet Airways and IL&FS group.

The bank had reported that its watch list of stressed assets was Rs 10,000 crore. The results brought down the share price from a peak of Rs 280 on April 1 to Rs 140 on April 7.


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