Yes Bank on Friday disclosed its $2 billion fundraising plan through a massive issue of new shares to institutional investors and wealth managers. Raising the finds is critical for its survival, but hinges on the Reserve Bank of India's approval to large investors like Hong Kong-based SPGP Holdings and Canadian family office of Erwin Singh Braich. The two investors have committed $1.2 billion out of the total recapitalisation of $2 billion. London-based Citax Holdings has offered to invest $500 million in Yes Bank.
CNBC-TV18's Nisha Poddar talked to Somitra Agrawal, MD and CEO, SPGP Holding Hong Kong, to find out more about their rationale for eyeing a stake in Yes Bank
and their investment plans in India. Here are the edited excerpts of the interview:
Q: You have committed and proposed $1.2 billion of investments in Yes Bank, what is the reason and the rationale for your interest in this company?
A: Basically, we focus on investments with strong fundamentals. We have been interacting with Yes Bank for a few months and we feel that the bank – even though it is a young bank –still has very strong fundamentals. We see the bank growing more stronger after the round of investment.
Q: SPGP Holding and Erwin Braich Family Trust tied together to give this particular proposal. How do you divide the equity shareholding between the two and what is the source of funding and arrangement between the two partners?
A: The proposal that we have provided to Yes Bank is a joint proposal by SPGP Holdings and Erwin Braich. The final shareholding breakup probably will be formed up post we get all the approvals from the central bank.
The funds which are required for the investment with the bank have already been earmarked and very soon we will be transferring it into the formal escrow account with an international bank probably in Canada or in Hong Kong and post receipt of all the approvals, the funds will be formally remitted to the designated account of Yes Bank.
Q: I also wanted to understand what is the kind of funds that you have or assets under management (AUM) you have globally to be a credible player to buy into an Indian bank?
A: Globally, we currently manage more than assets in excess of about $15 billion, primarily our assets are located in Canada, North America and Asia, including parts of Japan. We have investments in Sri Lanka, we have investments in Thailand, Philippines and in Australia.
Q: Any particular investments in India so far or is this going to be the first meaningful one for you?
A: This will be our first major investment, although we have committed nearly $3 billion of capital to various Indian project. Primarily these projects are related to oil and gas, liquefied natural gas (LNG), more related to downstream LNG assets, agriculture and financial services.
We have committed a substantial amount of investment in a company called Matix Fertilisers. It is a urea plant based on West Bengal and we have committed investments in Dighi Ports where we intend to set up six-eight million tonne LNG facility post our investment.
Q: Recently, you had shown interest in Reid & Taylor and you decided against going ahead with it, there has been a lot of negative press around that, how would you clarify your position over there?
A: I cannot comment or control on the media reports but suddenly this reporting about Reid & Taylor has been a misconception or misinformation.
To tell you the background, we have $200 million corpus called the Black Pearl Investment Fund, which we are focusing for investment in branded retail in India. It is an India dedicated enterprise. We have already committed more than $100 million of investment in India in about six companies. Most of them will be coming out as a public announcement very soon.
As a part of this venture, we did look at Reid & Taylor when it was under the insolvency proceedings with the National Company Law Tribunal (NCLT). We had initially put in our expression of interest to see whether this is something which can fit into strategic thinking, however, based on a very initial due diligence, we figured out that there are too many statutory regulatory and financial issues related with the company. So we decided that we will not be able to take it forward beyond a point.
The court understood where we came from, the NCLT court, and they did offer us a position that if we want more time to do the due diligence, we can put in some deposit and then take more time to do the due diligence. By that time, my risk committee in my board had already decided that we will not be able to pursue that. So we could not accept the court’s offer and hence we withdrew it.
Q: Finding the source of fund was not the issue in Reid & Taylor as has been widely understood?
A: No. We were not comfortable with the way the company’s structure was presented to us. Our risk management team just couldn’t appreciate or just couldn’t take forward the various risks in that particular transaction.
Q: As far as Yes Bank investment is concerned, the CEO has mentioned that it could be around Rs 78 per share, which could be in line with the 26-week average Sebi formula. Are you in tune with this valuation and you are comfortable to invest at these levels?
A: Our term sheet does specify a valuation range and it is also subject to the prevailing regulations from Sebi as an investor. As a binding investor, we will definitely follow what is allowed under the regulations.
Q: I wanted to understand, is this purely financial in nature or are you looking at a strategic indent and what is the kind of control or board position that you have asked for by way of this investment?
A: We would certainly like to be a part of the whole growth strategy of the bank. We do bring in a certain level of expertise. Even though globally this is our first investment in a bank but we have been operating investment bank and fund management houses globally. So we do bring in some expertise in terms of the growth for the growth plan of the bank.
We would love to participate in the growth strategy but we would not go to that extent of having control over the bank or the control operations of the bank. We have very strong confidence in the current management of the bank. We would have certain positions at the board – that also depends on the regulators, how much they think we need to participate on the board. Whatever participation we have on the board, we will be active enough to provide our value adds globally to enable the bank to go to the next level.
Q: How confident are you of the fit and proper certificate from regulator RBI, which is so critical for your investment in Yes Bank?
A: For us also, this is a first-time investment in a bank in India. So the fit and proper concept as what the regulators want, we are submitting our documents. I hope the regulators and the whole market accepts or appreciates the efforts, which we are putting in to bring in good long-term capital into the country. So considering all that background, I hope everything is approved in accordance with the guidelines.