YES Bank takes first step to share sale

Mumbai: Private sector Yes Bank has hired six investment banks in the first step to shore up its capital position through a share sale. The bank is looking to raise about Rs 10,000 crore by selling shares either through a rights issue, qualified institutional placement (QIP) or a follow on public offer (FPO) depending on market conditons, two people involved in the issue said.

SBI Capital Markets, the investment banking arm of Yes Bank's largest shareholder State Bank of India (SBI) is leading the sale along with investment banking arms of two other shareholders of the bank namely Kotak Mahindra Capital and Axis Securities.

Three foreign banks, HSBC, Bank of America and Citibank have also been appointed to help find investors for the issue. Yes Bank did not reply to an email seeking comment.

"It is still early days and what route we take will depend on the valuations we will get. Investment bankers will meet on June 5 to take stock of the issue. It is unlikely that the sale will happen this month because a lot of paper work will be needed," said one of the two persons cited above.

In March, Yes Bank was placed under moratorium by the RBI due to a consistent outflow in deposits and as the bank failed to raise capital and meet its minimum regulatory requirement.

Under a government approved scheme a SBI led consortium of banks took control of the lender replacing its board. SBI holds 48.21% in the bank while Kotak Mahindra holds 3.61% and Axis Bank holds 4.78% stake.

The bank needs to raise atleast Rs 4000 crore of equity capital this year to comply with manadatory RBI requirements, Chief Executive Officer Prashant Kumar had said.

The bank's Tier 1 or core capital ratio is at 6.30% below the mandatory requirement of 7%. It already has an enabling resolution to raise Rs 15,000 crore in capital.

"Our pitch to investors is a ready bank with all the vectors in place in a market which is likely to only grow. This bank has had a checkered history but we are hoping investors will ignore the past and look to the future. We will need to be sure that we can pull off a minimum amount or get commitments from investors before we go ahead," said the second person cited above.

Bankers are wary of demand for the bank's shares because of previous aborted attempts by the lender to raise money after even naming investors at least twice in 2019.

The bank needs more capital despite a government initiated Rs 10,000 crore bail out led by SBI and an unprecendeted Rs 8415 crore write-down of additional tier-1 bonds which helped Yes Bank post a notional net profit of INR 2,629 crore in the three months to March 31. Excluding the write down the bank would have reported a net loss of INR 3,668 crore in the quarter.

The bank's asset quality has deteriorated with gross NPAs increasing to 16.80% in March 2020 from 3.22% a year earlier.

The bank's deposit base has continued to see an erosion and stood at Rs 1.02 lakh crore on May 2 down from Rs 1.05 lakh crore at the end of March indicating that the new management taking over on March 18 has had no impact on depositors sentiment on the bank.

In the seven months since the end of September the bank's deposit base has halved from Rs 2.09 lakh crore.

"We have to see how investors respond to this issue. The bank's stock price is also not great which means that we cannot charge much of a premium if we go for a QIP which is the quickest way to raise money. A FPO will allow us to charge a premium but since its a public issue it will need more time and compliance. So we will have to weigh our options," said the second person cited above.

Yes Bank closed at Rs 27.20 on BSE unchanged from previous close while Sensex rose 1.6% to 33825.53 points.