Mumbai: Yes BankNSE 1.12 %, facing investor wrath over the actual amount of its stressed assets, is in talks with two private equity investors – Advent International and Apax Partners – to raise equity funds to build investor confidence after attempts for a share sale to a broader set of institutional investors did not materialise, said two people familiar with the matter.
The bank may raise as much as Rs 3,000 crore from the share sale to private equity investors as its new chief executive Ravneet Gill tries to rebuild the image of the bank which took a knock in the past six months after the RBI turned down its proposal for another term for founder Rana Kapoor. “The bank has to raise capital quickly and Gill doesn’t have the luxury of time,’’ said one of the persons cited above. “Raising funds in a qualified institutional placement was proving to be difficult, so the choice has now come to private equity investors.’’ Apax and Advent declined to comment on the discussions with Yes Bank and a likely investment in it. Yes Bank did not respond to an email seeking comment. There is no certainty that the discussions will lead to a transaction.
Yes Bank is undergoing management change amid doubts about the quality of assets. While it reported a record loss of Rs 1,506 crore in the March quarter due to exposure to aviation, infra and real estate turning bad and said the worst may be over, investors are sceptical.
The stock has fallen more than 45 per cent since its March peak of about Rs 280. To gain confidence, the management has to raise fresh capital, which could also be used to provide for any deterioration in future.
Apart from segregating risk and credit approvals, Yes Bank is working towards reducing portfolio concentration in real estate and project finance. It is adopting conservative accounting norms, especially on fees, and much stricter early warning system for portfolio control.
The bank could dilute less than 10 per cent and less than 5 per cent to the two private equity firms each. At current prices it may be Rs 3,400 crore. The private lender has been under the RBI radar had last raised about Rs 4,906 crore through QIP in March 2017 at a price of Rs 300 per share (adjusted to stock split from Rs 10 to Rs 2). This was after an aborted attempt to raise a billion dollar through QIP in September 2016, that had to be pulled out soon after its launch.
For private equity investors too, this could be an opportunity to take a slice of that Indian financial services that is set to benefit from the forecast economic growth revival in Prime Minister Modi’s second term.
Fortunes of corporate of banks are on an upswing with ICICI Bank and Axis Bank trading at near life-time highs as investors bet that these are set to benefit after the clean-up of their bad loans.