Yes Bank Investors Back Its Plan to Raise as Much as $2 Billion

(Bloomberg) -- Yes Bank Ltd. said investors agreed to back a fund-raising plan, bolstering the Indian lender's efforts to clean up its books after heavy provisions against bad loans.

Investors including Citax Holdings Ltd. & Citax Investment Group, Erwin Singh Braich/SPGP Holdings and a top tier U.S. fund house “individually expressed their agreement/willingness to subscribe to equity shares” of the bank for an aggregate amount of $2 billion, which shall be undertaken on a preferential allotment basis, Yes Bank said in a filing after a board meeting on Friday.

The board has therefore today taken the decision to raise up to $2 billion through preferential allotment at a price in accordance with Chapter V of the SEBI Regulations, 2018. None of the investors will be allotted equity shares such that their holding exceeds 25% of the share capital of the bank. The board shall reconvene on Dec. 10 to finalize and approve the details of the allotment and convene an extraordinary general meeting subsequently, to obtain the approval of the shareholders.

India's fourth-largest private-sector lender had said it aimed to raise about $1.2 billion in capital and received offers from bidders including an unidentified North American family office. Chief Executive Officer Ravneet Gill, who is about nine months in the role, has said raising the money will keep the bank running for the next two years.

RBI approval is required for stake purchases in Indian banks of more than 5%. Any non-financial entity can buy up to 10% of a lender, and for a financial entity the cap is 15%. In general the central bank is reluctant to allow larger stakes, though there's a provision to allow a single investor to pick up 40% or more under special circumstances.

A notable such exception came three years ago when Canada's Fairfax Financial Holdings Ltd. was allowed to buy a 51% stake in CSB Bank Ltd., then known as Catholic Syrian Bank Ltd. That marked the first time the central bank let a foreign firm take a majority interest in a local lender.

With exposure to several troubled shadow banks, real estate firms and stressed companies, Yes Bank's bad loans have risen sharply, forcing it to step up provisioning and eroding its capital. The lender's core equity capital is 8.70%, barely above the regulatory minimum of about 8%.

Gill is trying to clean up the bank after the RBI forced his predecessor, co-founder Rana Kapoor, to step down following a dispute over the disclosure of bad loans. With 314 billion rupees ($4.4 billion) of exposure to junk-rated companies, the bank might need more capital to set aside for defaults in the future.

To contact the reporter on this story: Suvashree Ghosh in Mumbai at sghosh186@bloomberg.net

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Colin Keatinge, Tiago Ramos Alfaro

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