YES Bank will certainly raise funds through investments, said Ravneet Gill, managing director and CEO of the bank on Wednesday, adding that "the market, unfortunately, picked up that there may be some uncertainty around this".
The YES Bank board has taken no decision on the capital infusion offers before it, but has said that options are still under consideration. It said the board is favourably considering Citax Holdings and Citax Investment Group's $500 million offer.
The board decided that the final decision regarding allotment to Citax Holdings and Citax Investment Group will follow in the next board meeting, subject to requisite regulatory approval, the filing said.
“There were two reasons which need to be understood... the first and foremost is that what we mentioned was that we wanted to complete the entire documentation before making the allotment which is a process which is underway... last night (Citax) has written to us saying that all details will be provided to us and they will be immediately approaching the Reserve Bank of India (RBI) for approval for their stake given the fact that it is going to be over 5 percent," Gill said in an interview with CNBC-TV18.
“The timing of the board meeting would have been better but in terms of the certainty of the money coming in of the investment - on that, there are no questions," he added.
Giving the background of the investor company, he said, "The investor has financial services background... they have previously invested in banks as well. So they have that experience too."
He added that while they have had informal discussions with the RBI, the formal process can only start once the board has approved the allotment.
The bank said in a filing to stock exchanges that the binding offer of Erwin Singh Braich/SPGP Holdings continues to be under the board's consideration.
Talking about the credibility of Erwin Singh Braich, Gill said, "It is not as if these are decisions that the banks take lightly. I mean the due diligence is very extensive and it is very deep. Given the fact that this is a group, which is based in Canada, for instance, and has investments in other parts of the world, I think that entire exercise in terms of being thorough with due diligence has been an extended one. But again I think just to be able to come to a determination based on what may be there in the social media, I think would be a little hasty."
Questions over credentials of investors
The bank on November 29 said that it will raise $2 billion through a massive issue of new shares to institutional investors and wealth managers.
Investors such as Hong Kong-based SPGP Holdings and the Canadian family office of Erwin Singh Braich said they have made a bid for the private sector lender's shares. The two investors have committed $1.2 billion of the total recapitalisation of $2 billion.
Not all financial analysts and brokerages are thrilled with the proposed investment of Singh in the bank.
Global rating agency Moody's on Dec 4 downgraded the ratings on YES Bank, citing asset quality concerns and the shrinking capital buffers. The capital-raising plan announced has execution risks, it said.
A recent report by IANS, quoting anonymous analysts, said Singh was not even able to pay up Rs 2 crore for earnest money in the Reid & Taylor bid under NCLT earlier this year while SPGP, a Hong Kong-based fund, could not cough up investment in the Reid and Taylor case, reducing the chances of RBI giving approval.
IDFC Securities later said further background checks on lender Erwin Singh have thrown up ‘discomforting' revelations.
“We have already included links to many legal proceedings in which Erwin Singh, potentially the largest investor in YES Bank’s proposed capital raise, is involved. We dug up some more. The more we read, the more uncomfortable we get about his credentials,” it said in a note, which CNBC-TV18 reviewed.
According to a Bloomberg report, which cites interviews and court records, Braich, 63, has a history of bankruptcy, business deals which went wrong, and several court cases in the United States and Canada.
However, Braich told Bloomberg that he had the funds and had been "under the radar" with "a lot of different holdings and assets”. He further claimed that the doubts around his bid would be erased soon, the report said. "I don’t think Mr Gill is a stupid man," he said, as mentioned in the report.