US-based Capital Int’l commits to invest $120 million in YES Bank

Capital International, a part of the $1.87-trillion Capital Group based in the US, has committed to invest at least $120 million in YES Bank with the possibility of raising that in the future. The fund is one of the eight investors that expressed interest in investing in YES Bank and is waiting for regulatory approvals in the US, two people familiar with the matter, said.

In a notice to the stock exchanges on Friday, YES Bank said a top tier US-based fund house is one of the three institutional investors that committed a total of $200 million to subscribe to shares of the bank.

The bank plans to raise $2 billion on a preferential allotment basis from a total of eight investors. Besides three institutional investors, there are five family offices which have committed to invest in the bank including Canadian billionaire Erwin Singh Braich’s SPGP Holdings, which has expressed its willingness to invest $1.2 billion or 60 per cent of the total $2 billion commitments received by the bank.

“If Capital International comes on board, it will give some solidity and respectability in terms of investors in the bank. They are one of the biggest funds and though they have committed a small amount compared to their size, they can always invest more in the future. Among all the investors announced by the bank, this is the most blue blooded and right up there among the largest private equity investors of the world,” said a person closely associated with helping the bank raise funds.

YES Bank did not reply to an email seeking comment. A spokesperson for Capital Group said, “We have a long-standing policy not to comment on market rumours or speculation.”

The bank cannot allot equity shares making up more than 25 per cent of its share capital, according to a Reserve Bank of India communication received by YES Bank.

As a result, it remains to be seen whether Braich can invest all of its $1.2 billion committed because it will give him more than 25 per cent of the stake.

“Perhaps the bank is also preparing for a Plan B in case they need more investors later because the RBI is certainly not going to give them permission to take more than 25 per cent stake. There is still some work to be done before we know the full picture,” the person cited above, said.

Discussions with Braich are ongoing and are expected to conclude shortly and hence the binding term sheet for the deal has been extended to December 31, YES Bank said late Friday.

Other investors include Citax Holdings and Citax Investment Group, which expressed willingness to put in $500 million. Indian investors include GMR Group with $50 million, Aditya Birla Family Office ($25 million) and Rekha Jhunjhunwala with $25 million.

Foreign funds Discovery Capital ($50 million) and Ward Ferry ($30 million) are the other investors. Analysts have raised doubts over pedigree of some investors named by the bank.

“For nearly 85 per cent of the proposed $2 billion commitments for YES Bank (the) quality is a big suspect. To be honest, we hadn’t even heard of SPGP Holdings/ Erwin Singh Braich and Citax investments. Tell me whether anyone of you have heard about them or have some knowledge of who they are? What is their business? What have been their successful investments in the past not in India, for that matter, anywhere in the world? What is their source of money?” Suresh Ganapathy, research analyst at Macquarie Capital Securities, said in a note on Monday.