YES Bank board approves up to $2 billion fund raising plan

Mumbai-based private sector lender, YES Bank on Friday said the board has approved to raise up to $2 billion from new investors, including HK-based SPGP Holdings, backed by Canadian family office of Erwin Braich, and Aditya Birla Family Office.

"The Board of Directors, at its meeting today, has taken note that the following investors have individually expressed their agreement I willingness to subscribe to equity shares of the Bank for an aggregate amount of USD 2.0 Billion which shall be undertaken on a preferential allotment basis in terms of Chapter V of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018," YES Bank said in a regulatory filing.

YES Bank said the board has approved to raise fresh funds from new investors such as top tier US fund house ($120 million), Discovery Capital ($50 million), Ward Ferry ($30 million), Aditya Birla Family Office ($25 million), Citax Holdings Ltd & Citax Investment Group ($500 million), GMR Group and Associates ($50 million), Erwin Singh Braich I SPGP Holdings ($1200 million) and Rekha Jhunjhunwala ($25 million).

"In light of the above, the Board of Directors has today taken a decision to raise up to USD 2 Billion through preferential allotment at a price in accordance with Chapter V of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 . None of the Investors will be allotted equity shares such that their holding exceeds 25% of the share capital of the Bank," it said.

Also, the board of directors will meet on December 10, 2019, to finalise and approve the details of the preferential allotment and convene an extraordinary general meeting subsequently, to obtain the approval of the shareholders, the bank said.

In a conference call with analysts earlier this month, Ravneet Gill disclosed that the bank had received a sum total of a little over $3 billion of offers, including a binding bid of $1.2 billion from a North American family office. The only binding offer from this North American family office had an expiry date of November 30th. Gill said that eight other suitors had shown interest, of which six were private equity players, two domestic mutual funds and a “mix of two of India’s most highly respected individual financial investors & two family offices”.

The country’s fourth-largest private sector bank has been under pressure because of its troubled exposures to large defaulters like Dewan Housing Finance Ltd, Cox & Kings, Café Coffee Day, Altico Capital, Jet Airways, and other stressed companies. It's chief executive officer Ravneet Gill assumed charge only ten months back when the Reserve Bank of India forced its former CEO and founder Rana Kapoor to exit the bank in January 2019 due to governance and compliance norms.

After Gill assumed charge, the bank reported a sharp rise in bad loans and its BB & Below rated book now stands at almost 10.1 percent of the total loan book, at Rs 31,400 crores as of the quarter ended September compared to Rs 29,470 crores in the previous quarter. The bank reported a gross non-performing assets ratio of 7.39 percent in the second quarter, up from 5.01 percent in the last quarter, and a net non-performing assets ratio of 4.35 percent compared to 2.91 percent in the first quarter.

The fundraising is very critical for the bank to shore up its capital base, with its core equity (CET 1) at 8.70 percent as of September 30th, just 0.70 percent above RBI’s requirement of 8 percent. The provision coverage ratio (PCR) of Yes Bank is at 43.1 percent, compared to the industry average of 65-70 percent or higher. YES Bank recently reported that RBI had found that the bank under-reported its bad loans by as much as Rs 3,277 crore as of March 2019.