HDFC, Kotak Mahindra Prime and SBI may buy shares at Rs 10 each and will jointly invest Rs 6,450 crore in the first tranche
The Housing Development Finance Corporation (HDFC) Group and Kotak Mahindra Prime are reportedly set to join the State Bank of India-led consortium to bail out troubled private lender Yes Bank.
The trio may buy shares at Rs 10 each and will jointly invest Rs 6,450 crore in the first tranche, Mint reported.
The draft recapitalisation plan by SBI envisions Rs 20,000 crore capital raise for Yes Bank over the next six months, to be infused in stages. It was submitted to the Reserve Bank of India (RBI) and the Centre on March 11, sources told the paper.
While mortgage lender HDFC and auto financier Kotak Mahindra Prime (a subsidiary of Kotak Mahindra Bank) will invest Rs 2,000 crore each, SBI will put in Rs 2,450 crore in round one. In round two, existing capital from Yes Bank will be used to build equity of Rs 10,000 crore, sources added.
Once the Rs 10,000 crore is raised, private equity (PE) firms will also be tapped for the remaining Rs 10,000 crore, they said.
The central bank looking for the maximum number of investors is a part of the consortium to ensure that no single entity/individual (other than the SBI) holds more than 5 percent stake in the troubled bank, TOI reported.
The government is keen on involving PE to keep the ‘nationalisation’ tag away from the Yes Bank rescue as most public sector banks (PSBs) are in capital conservation mode.
However, global PE players have laid out important conditions, the Business Standard reported. JC Flowers, Cerberus Capital, Tilden Park Capital and Blackstone want SBI to completely write down Yes Bank’s Tier II bonds as a part of the liability clean up.
As per the report, they want SBI to identify all stressed loan accounts and sell them to an asset reconstruction company (ARC). PEs are willing to invest up to $1.7 billion in Yes Bank but on similar terms that were offered to SBI, i.e. at Rs 10 per share.
“SBI will not want its stake in Yes Bank to go beyond 49 percent even though it has to bridge the gap between the required equity and what is eventually raised,” a source told the Economic Times.
The RBI proposed a revival plan for Yes Bank that would include initial capital infusion and funding lines to prevent a relapse once the 30-day moratorium imposed on March 5 is lifted. As per the plan, investors in additional Tier I (AT1) bonds have agreed to write-off 80 percent of their investment and convert 20 percent to equity, the TOI reported.
The central bank is expected to announce finalised commitments from SBI and other banks such as HDFC Group, Kotak Mahindra Bank and ICICI Group – who are in talks for equity investment - as soon as the banks confirm their investment.
As per the plan, once the announcement is made, banks will infuse Rs 20,000 crore as equity on day 2; public sector banks will invest around Rs 30,000 crore in certificates of deposits (CDs) of the bank on day 3, and the moratorium will be lifted on day 4, the TOI report stated.
The AT1 bondholders have Rs 8,500 crore investment Yes Bank, which will be converted into 170 crore equity shares with a face value Rs 10. This means an investment of Rs 1,700 crore with a three-year lock-in. The one sticky point would come from mutual fund houses (MFs) that hold AT1 bonds in pure debt funds as the Securities and Exchange Board of India (SEBI) restricts equity investments by funds.Moneycontrol could not independently verify the reports.