Private sector lender Yes Bank, which was recently rescued by a consortium of banks led by State Bank of India (SBI), may attract interest from a clutch of foreign investors as part of a massive second round of capital infusion, multiple people with knowledge of the matter told Moneycontrol.
"Marquee overseas investors, including the likes of private equity giant Carlyle, Canada’s Brookfield, US-based Tilden Park Capital and other global suitors, may explore an investment in Yes Bank post May 2020," one person told Moneycontrol.
Another person familiar with the matter told Moneycontrol that if the investment plans fructify, this second round may see a combined fund infusion of around Rs 10,000 crore from foreign investors.
"The pricing will be finalised based on SEBI norms," he said.
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A third person said as of now, the plan is to issue new shares to these foreign investors and either the preferential allotment or QIP route could be used in lieu of a minority stake. "The first round has seen an infusion of around Rs 11,000 crore and an additional Rs 10,000 crore should put the bank in a comfortable position," the person said.
All the people Moneycontrol spoke to requested anomymity.
GLOBAL FUNDS BULLISH ON INDIAN FINANCIAL SERVICES SEGMENT
The investment will be firmed up once the fourth quarter earnings of Yes Bank are published and there is more clarity, according to the first person quoted above. These foreign investors did not participate in round one, which was led by domestic investors and are keen to carry out a detailed due diligence and then take a final call, the person added.
Also Read: Yes Bank's journey from India's 7th largest bank stock to management crisis
One of the potential investors, Carlyle Group, an American multinational private equity firm, has worked closely with SBI on past investments in India. It made a partial exit recently from SBI Cards as the credit card issuer made its D-street debut with a Rs 10,000-crore IPO.
In March 2019, Carlyle made its biggest investment in India by picking up 9 percent of SBI Life Insurance for Rs 4,635 crore. In November 2019, it made a partial exit in the insurer by selling a 3 percent stake. According to media reports, the private equity major has also sealed a $1.5-billion India-focussed distressed asset fund with SBI.
Canada-based Brookfield, on its part, has entered the Indian financial services space by purchasing a 40 percent stake in NBFC Indostar Capital Finance for Rs 1,450 crore.
Carlyle declined to comment for this article. Moneycontrol is awaiting responses from Yes Bank, SBI, Brookfield and Tilden Park Capital and will update this article with their responses.
THE YES BANK BAILOUT
In a government monitored rescue act, SBI, India's largest lender, approved the infusion of Rs 7,250 crore at Rs 10 a share for a 49 percent stake in Yes Bank on March 12, 2020. SBI was joined by other lenders such as HDFC, ICICI Bank, Axis Bank, Kotak Mahindra Bank, IDFC First Bank, Federal Bank and Bandhan Bank, which collectively pumped in Rs 3,950 crore and picked up minority stakes.
All these lenders are already sitting on handsome gains, as the Yes Bank stock has surged by 115 percent in and the market capitalisation has risen more than ten-fold to Rs 67,647 crore in the past week.
Earlier this week, Yes Bank said it resumed normal banking operations after the cash-starved bank was placed under moratorium by the Reserve Bank of India (RBI) on March 5, 2020, to protect the interest of depositors. The RBI aso superseded the board, including capping withdrawals at Rs 50,000 per depositor as the bank’s erstwhile management failed to present a credible resolution plan.
Former SBI CFO and Deputy Managing Director Prashant Kumar has been appointed as the new managing director and CEO of Yes Bank, which also reconstituted its board of directors. "Yes Bank has taken adequate measures to restore banking services and ensured that the branches and ATMs have adequate supply of cash. However, there is no need to need for customers to rush for withdrawals and there is absolutely no issue on the liquidity front," Kumar said earlier this week.
Due to its failure to raise capital, Yes Bank has witnessed a sharp outflow of deposits in the past few quarters. Its deposit base shrunk by around Rs 28,000 crore between December 31, 2019 and March 5, 2020.
Since March 31, 2018, the deposit base has declined by over Rs 63,000 crore, according to Crisil. The bank's asset quality also remains a matter of concern with gross non-performing assets (NPA) rising to 18.9 percent in the third quarter. Yes Bank also posted a loss of Rs 18,564 crore, its largest in a quarter.