Expect stressed loan auction to conclude in 60-75 days, says YES Bank MD

YES Bank MD & CEO Prashant Kumar

Private sector lender YES Bank is expecting the sale of its stressed loan portfolio of up to Rs 48,000 crore to conclude in the next 60-75 days, the bank’s Managing Director and Chief Executive Officer (MD, CEO) Prashant Kumar said in a press conference on July 18.

As per Kumar, JC Flowers has submitted a base bid of over Rs 11,000 crore for the bad loan pool and any bidder has to match the offer or bid higher to acquire YES Bank’s stressed loans.

Depending on the outcome of SWISS Challenge auction which began Saturday, the bank will take a call on whether or not it will invest up to 20 percent stake in JC Flowers ARC. YES Bank can invest up to Rs 350 crore in the ARC if JC Flowers’ bid remains highest, Kumar said.

Kumar's comment come after YES Bank on July 15 said it approved JC Flowers Asset Reconstruction Company to be the base bidder for the proposed sale of the bank’s identified stressed loan pool amounting to Rs 48,000 crore.

“In accordance with the guidelines issued by the Reserve Bank of India, the Bank proposes to run a transparent bidding process on Swiss Challenge basis for sale of such portfolio using the JC Flowers ARC’s bid as the base bid,” it said in an exchange notice.

Under the Swiss Challenge method of bidding, highest bid placed in the first round of auction becomes base price for other bidders before second round of auction. Any asset reconstruction company (ARC) or other third parties which places the highest bid in second round of auction gets awarded the asset, as per the Reserve Bank of India (RBI) guidelines.

Moneycontrol first reported on May 3 that the bank will conduct the ARC sale via the Swiss Challenge method.

Going ahead, the broader plan of a YES Bank-backed ARC is to attract more stressed loans for resolution. Kumar said presently there are only 3-4 major ARCs in India that are credible and have sound corporate governance policies in place.

Kumar said after the completion of stressed loan transaction, YES Bank will have bad loans in the range of 1 percent to 2 percent. Lastly, Kumar reiterated that the bank will likely raise up to $1 billion in the current fiscal.

As of March end, YES Bank’s gross non-performing assets (NPA) stood at 13.9 percent, down from 14.7 percent in the previous quarter. Net NPA declined to 4.5 percent from 5.3 percent in the previous quarter.

During January-March, the bank reported a net profit of Rs 367 crore against a loss of Rs 3,788 crore registered in the corresponding quarter of the previous fiscal.