Stake dilution post $1 bn QIP may not exceed 10%: Yes Bank

While the total capital raised will depend on the final price and number of shares issued, he expects it to add roughly Rs 105-110 to the book value.Below is the verbatim transcript of Rana Kapoor's interview to Shereen Bhan and Ritu Singh on CNBC-TV18.Shereen: It just a one line flash that we have so perhaps you could give us more details we understand that there is a confirmation now on that billion dollar fund raise?A: Yes, indeed we have just about a few minutes ago obtained final approvals of the stock exchanges both NSE and BSE and our placement document has been uploaded and transmitted via Bloomberg, I would like to believe around the world. We have also appointed some bankers. Our deal is being led by Goldman Sachs, we have Motilal Oswal, we have CLSA as our global coordinators and the book running lead managers and in addition we have 8 other joint book running lead managers, which are best of great combination of international and domestic investment bankers. The process has been rolled out literally 5 minutes ago.Shereen: I wanted to understand whether this will lead to a dilution of about 12-13.5 percent that was what was anticipated?A: Well, if you see our target price, I do expect that the dilution should not exceed around 10 percent or so, should we be able to get a good response overall at the current pricing level, we like to believe that the dilution will be approximately about 10-11 in that range.Ritu: Another question for you was the proceeds of the qualified institutional placement (QIP) of course is a billion dollar big money. You had raised about USD 500 million the last time around about Rs 2,900 odd crore, this time where you looking to deploy it, which are the sectors, what kind of credit growth are you anticipating where you looking to use this money?A: In our business of banking especially with the tailwinds in the economy, now in a way exceeding the headwinds, we are seeing a fair amount of opportunity for growth. Growth in sunrise sectors like renewable energy, in healthcare sector, pharmaceuticals and automobiles, in transportation and logistics, we are also looking at tremendous momentum of growth in our SME businesses which are key drivers for the next few years till 2020.We are seeing a significant uptick as well in our retail banking businesses and consumer lending, there is a growth which is certainly being witnessed as a bank as is being demonstrated in the year gone by in fiscal 2015-16. We printed credit growth of 30 percent and in the June quarter also we achieved the credit growth of 33 percent. We like to believe that Yes Bank is a 30 percent growth story at least till 2020 and we have distinct visibility till then as part of our 5 year growth plan, which ends in 2020. It is a good mix of corporate businesses which are coming back nicely and the opportunities for a bank like ours to really grow in the commercial banking and the business banking and in the consumer banking segments.Ritu: Could you tell us what your current tier 1 and tier 2 capital is and after you get this infusion what is the kind of uptick we can expect there?A: Our capital adequacy is well above 15 percent and our core tier 1 presently stands at 10.5 percent. With this additional capital which is approximately will increase our core equity by 45-47 percent, so you can well tabulate that the core tier 1 should go up beyond 15.5 percent, which means that we will have once the deal is successfully closed, we will have growth capital for the next 3 years quite comfortably to grow at 30 percent.Shereen: What is the price range?A: At the upper end the price range is at Rs 1,410. Today stock price was Rs 1,450 and the weighted average of our cost today was at Rs 1,421. We are basically targeting upper range of around Rs 1,410 and we have confidence and conviction to believe based on feedback from our investors that we should do fairly well. I can’t say we will end at Rs 1,410 but that is indeed the target.Ritu: Also of this USD 1 billion QIP, could you confirm to us if USD 200 million would be the greenshoe option for investors?A: It is a straight billion dollar deal, there is no split. It’s a one single number, one round number one billion that’s it.Ritu: How much would your book value really go up by after you raise this USD 1 billion through the share sale?A: It is a very intelligent question all depends on the final price, but give or take it should add book value of approximately Rs 105-110 basis the fund injection and the number of shares to be issued consequently, so it should add in the range of Rs 105-110.Ritu: If I may ask the price band exactly, would it be in the range of Rs 1,350?A: As I mentioned to you that we are targeting towards Rs 1,400 to 1,410 and that is quite an attractive price considering the share movements in the last couple of days. So, let us see how it goes, the bankers are working on it. They have rolled out the deal literally 10 minutes ago and I am quite hopeful that with some of the best banks in the world leading this deal and with extensive meetings that we had all over the world, my management team and I particularly for the last four five months we do expect that we will get a very good response and I hope at the upper end of the pricing range.Ritu: Since the stock has done very well specially on the back of this news being played up over and over again give us a reason why long term investors should invest in your QIP?A: It is the best growth story in Indian banking.Ritu: Being the size that you are, YES Bank you are almost fourth or fifth in the pecking order and you have ambitions for being much larger by 2020, some of that growth we would assume could also come inorganically and now that we have this war chest of USD 1 billion would acquisition be a route you would explore?A: I do want to clarify that the deal has just been rolled out and when the deal is closed we will have the capital. Right now the deal is just open. So, you have caught me at the opening and not at the closing and when it closes I will be more than happy to speak to you again. But the objective is that as you have seen YES Bank entered its large phase last year in April 2015 and we have a five year plan which is hard wired till March 2020. So, you can see that we are practically into six quarters of the 20 quarters of growth planned till 2020.In these five quarters we have demonstrated growth in excess of 30 percent and to me the message is that this growth capital that we mobilised if we are successful at this QIP will be maximised for high quality filtered risk sensitive growth and we have the engines in place, we have the vintage in place. We have seen cycles in our economy for a bank which is exactly 12 years and 15 days old today and we are now all set to become a good large sized bank in India by 2020 and we like to grow organically at a target of around 30 percent or so for the next four years.Ritu: So, is acquisition something that you are ruling out, is organic growth the only way to go for YES Bank? Can I deduct that from the statement?A: We actually do not like acquisitions because they impact the HR culture. Two, they divert the attention and three, basing the tailwinds in the economy by far exceeding the headwinds today the opportunity is organic, filtered high quality growth and my bank has demonstrated that the bank can grow 30 percent even in tough markets as in the last 1.5 years and as they become more favourable where pretty much all the macroeconomic issue is becoming very encouraging by far the best in the world today and with the support of the government reform process with the augmentation of the overall macro stability factors the tailwinds are very good in the economy right now and a banking institution like ours which has proven itself during its small and medium phase is very well now conditioned and positioned for the large phase. So, we want to be a large bank by 2020.