Yes Bank Looks To Onboard Multiple Investors Once Stressed Assets Are Sold

Yes Bank Ltd., which has partnered JC Flowers Asset Reconstruction Co. for sale of its bad loans, will raise up to $1 billion (about Rs 7,997 crore) worth equity capital later this year.

The private lender is in talks with multiple investors and will eventually raise the necessary funds from more than one investor, Managing Director and Chief Executive Officer Prashant Kumar said. The fundraise will help the bank push up its common equity tier-1 ratio to 14% from 11.5% now.

BQ Prime had reported on June 17 that the bank is in talks with Carlyle Group and a few other private equity funds to raise equity.

“It has to be multiple investors. For this kind of capital from one investor would be very, very difficult under regulatory guidelines,” Kumar told BQ Prime in an interview.

The bank will look to raise these funds through various available routes. “It can be through any route, QIP or preference shares. Depending on the market conditions and the interest and what is good for the bank, I think the board would take that call,” he said.

Yes Bank, according to Kumar, is looking for credible names to buy equity as it would provide a lot of confidence to its retail investors. “The second thing is that they should have a long-term view on the bank. If someone is looking for a return, say a 12-18 month kind of thing, I think that kind of investment in the bank would not be the correct one.”

The lender, which was placed under reconstruction in March 2020 due to poor financials, has finally exited the process and is looking at growth now, Kumar said.

The sale of bad loans to JC Flowers ARC is only the first step to be able to raise equity capital, he said. Once the sale is concluded, the bank will be left with about 2% gross non-performing assets compared with 14% currently.

“As a bank we have a responsibility toward all our investors—not only the existing investors, but also the prospective investors. For any investor, if the balance sheet becomes strong, it becomes clean, it definitely gives a lot of confidence,” he said.

Yes Bank had announced a Swiss Challenge auction on July 16, where JC Flowers ARC acted as the base bidder with a Rs 11,110-crore offer for the entire pool of bad loans.

Other ARCs have been invited to place competing bids for the Rs 48,000-crore stressed assets under this auction and JC Flowers ARC will be given the option of matching the competitor's higher bid. The sale process, Kumar said, will conclude in 60-75 days.

Under this sale process, Yes Bank will also invest Rs 350 crore in JC Flowers ARC to pick up a 20% stake. This joint venture, he said, will then become a stressed assets platform that can be used to resolve bad loans at other banks too.

Watch the full interview here: