Fundraising is on top of the agenda as the new board of troubled lender YES Bank convenes its first meeting today after the government notified the reconstruction scheme for the bank.
CNBC-TV18 had reported on March 23 that the board meeting will consider the second round of fundraise and that the State Bank of India-led financial institutions are looking to conclude their investment in the bank before the close of the financial year.
Three independent sources confirmed to CNBC-TV18 that YES Bank has engaged four investment banks to manage this second phase of fundraising. SBI Caps, ICICI Securities, Kotak Mahindra Capital and HSBC Capital Markets have been approached by the lender to raise capital, the people cited above said.
While the bank has secured Rs 10,000 crore of proposed investments in the first phase, two people aware of the talks told CNBC-TV18 that YES Bank will look to raise anywhere between Rs 10,000 crore to Rs 15,0000 crore in Phase 2, depending on the market conditions. “RBI standing behind YES Bank and so many domestic banks backing it is going to send out a strong signal to potential investors,” said one of the people involved in the deal talks.
Foreign investors including private equity players like Carlyle Group, Tilden Park Capital, Brookfield may consider investments in Phase 2, as per the people quoted above.
“Few investors (including Carlyle, Tilden Park and others) did a fair amount of work last time. It's only natural that they may be looking at this fundraise now” said another executive involved in the deal talks.
The bank needs additional capital largely to clean up its books and strengthen its balance sheet. Prashant Kumar, YES Bank’s administrator, had earlier said in a press conference last week that the second round of fundraising would help the bank meet any additional provisioning requirements and the first round of Rs 10,000 crore capital infusion from eight financial institutions would largely be needed to meet regulatory capital requirements and for growth.
SBI has announced its intention to invest Rs 6,050 crore in YES Bank, scaled down from Rs 7,250 crore initially announced, HDFC Ltd and ICICI Bank Rs 1,000 crore each, Axis Bank Rs 600 crore, Kotak Mahindra Bank Rs 500 crore, Bandhan Bank and Federal Bank Rs 300 crore each and IDFC First Bank Rs 250 crore.
YES Bank had reported gross non-performing assets (NPA) of Rs 40,709.20 crore and gross slippages of Rs 24,587 crore in the December quarter. Its SMA-1 book, i.e loans with dues outstanding for 30-60 days, stood at Rs 11,528 crore as of Q3 and SMA-2 book, which is loans outstanding for 60-90 days stood at Rs 2,383 crore in Q3.
“It would have been prudent for the bank to take all the hit upfront, and provide sufficiently,” one of the investing bank heads had told CNBC-TV18, saying 72 percent provisioning reported by the bank in its December quarter was a tad “disappointing”.
The board is expected to seek an omni-channel shareholder approval for various routes for fundraising, including a rights issue, follow-on public offer (FPO), QIP and others after today’s board meeting, one of the people quoted earlier said.