HomeFinance NewsSBI chairman: Expect many co-investors for YES Bank, won't ask govt for capital

SBI chairman: Expect many co-investors for YES Bank, won't ask govt for capital

Defending State Bank of India's (SBI) proposed investment in the troubled lender, YES Bank, its chairman Rajnish Kumar commented this Saturday morning, that the decision to invest was "by choice, not compulsion".

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By PTI March 7, 2020, 2:09:19 PM IST (Updated)

SBI chairman: Expect many co-investors for YES Bank, won't ask govt for capital
Defending State Bank of India

's (SBI) proposed investment in the troubled lender, YES Bank, its chairman Rajnish Kumar commented this Saturday morning, that the decision to invest was "by choice, not compulsion," even as it finalises its proposal, which it intends to submit to the Reserve Bank of India (RBI) by Monday.

In an interaction with the press, the chairman said depositors of YES Bank are in safe hands and have nothing to worry about. Kumar sounded confident of implementing the restructuring proposal for YES Bank before the 30-day RBI imposed moratorium period ends, saying his bank's due diligence and legal teams were working 24 X 7 to implement the plan at the earliest, "SBI team will not found wanting in this regard," Kumar added.

Explaining the math behind the proposed Rs 2,450 crore investment in YES Bank, Kumar said SBI would pick up 245 crore shares of YES Bank at Rs 10 each for a 49 percent stake initially, totally an investment of Rs 2,450 crore.

When asked what the bank would invest in YES Bank over a period of time, Kumar said that even if, in the worst case, all 2,400 equity shares were issued to raise capital as per RBI scheme, SBI's investment would very roughly total Rs 11,000 crore for 49 percent stake or Rs 5,500 crore for 26 percent stake. However, the SBI chairman maintained that the bank would not required that large an investment, as per his calculations.

SBI has initiated talks with other investors who would be interested in buying a stake in YES Bank. Kumar commented that even in the case of troubled financial institutions in general, there is considerable investor interest.

YES Bank was no different, Kumar said, adding that some investors were sensing an opportunity here. Later, while interacting with reporters offstage, Kumar said SBI had not had any discussions with LIC for bringing them on board as a co-investor in YES Bank.

Kumar said talks were on with potential investors, but he could not say at this stage how many of them would be roped in. Under the draft proposal, SBI will have to hold a minimum 26 percent in the bank for three years.

Whatever the final proposal, Kumar said the interests of SBI shareholders would not be compromised. He also said there would be the marginal impact of the investment on SBI’s capital adequacy ratio, and that there was “no question” of requesting the government for capital. SBI will maintain its Capital Adequacy Ratio at least 0.5 percent higher than the minimum RBI requirement, he said.

Even without due diligence, going by the pure gut, Kumar said the YES Bank deal was not overpriced. The cost of the YES Bank acquisition for SBI works out to Rs 10 per share. Kumar said he was mindful of the interests of minority shareholders of YES Bank, and that they were important stakeholders too.

Once YES Bank was out of moratorium it would be run by a professional team, Kumar said, adding that the intention was not to get involved in the day-to-day functioning of YES Bank. He said there was no question of a conflict of interest about the investment in YES Bank. "SBI will keep a two-arm distance with YES Bank," Rajnish Kumar quipped when asked why SBI would not poach YES Bank's customers.

He said the survival of YES Bank was critical to preventing a contagion in the banking industry, and that the presence of a credible name like SBI was important for a resolution. He said it was difficult to answer how many times SBI would have to play troubleshooter.

When asked if the ongoing Enforcement Directorate raids on Rana Kapoor, the former co-promoter of YES Bank would have any impact on the attractiveness of an investment in the bank, Kumar said, "We have to clearly distinguish between the people/the person (Rana Kapoor) and the enterprise (YES Bank), I don't think it will impact suitors."
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