YES Bank gets $3-bn offer from investors including PEs and domestic MFs

YES Bank has received offers for fund infusion of close to $3 billion from various investors, including private equity (PE) players and domestic mutual funds (MFs). 

Besides the $1.2-billion binding offer, the bank has also received offers from six PE players and two domestic MFs of a further $1.5-billion investment. Further, the bank is in early stages of discussions with a few domestic investors for another $350 million in investment.  

In a conference call with analysts, Ravneet Gill, managing director and chief executive of YES Bank, said the fresh capital would come in by December-end. The binding offer of $1.2 billion came from a North American investor, he added. 

“We feel it is not appropriate to just clean up the books. The bank would like to raise capital,” he added, adding that the bank was open to giving a board seat to the new investor who came on board.

The bank is in dire need of capital to not only provide for bad assets but also for growth. The common equity tier-1 (CET-1) capital stood at 8.7 per cent as of September, close to the regulatory requirement of 8 per cent till March 2020. The bank had, in August, raised Rs 1,930 crore via qualified institutional placement at an issue price of Rs 83.55 a share, which provided a breather. 

The bank posted 91 per cent decline in profit before tax to Rs 122 crore in the September quarter, compared to Rs 1,426 crore last year. The private lender reported net loss of Rs 600 crore, owing to a one-time deferred tax asset adjustment of Rs 709 crore. In the same quarter last year, it had reported net profit of Rs 965 crore. The stock closed at Rs 66.6 on Friday, down 5.46 per cent in anticipation of weak numbers. This followed the 24 per cent gain on Thursday after announcement of the binding offer. 

However, shares recovered ground from their 52-week low of Rs 29.05 apiece, reached on October 1. This was the third-biggest single-day gain for the volatile stock after it zoomed 33 per cent in early October, and 30.7 per cent in mid-February.

The bank also reported contraction in key parameters. Net interest income fell more than 9 per cent to Rs 2,186 crore in Q2FY20, compared to Rs 2,418 crore in the year-ago period. Non-interest income declined 35.8 per cent to Rs 946 crore, while operating profit slumped 38.4 per cent to Rs 1,458 crore.

Asset quality deteriorated sharply, with gross non-performing asset ratio at 7.39 per cent in Q2FY20, compared to 1.6 per cent in Q2FY19. Likewise, net NPA ratio stood at 4.35 per cent in Q2FY20, against 0.84 per cent in Q2FY19. Gross slippages came in at Rs 5,945 crore. YES Bank said it does not expect any substantial increase in stress, barring risks from the commercial real estate loan book. 

Lalitabh Shrivastawa, vice-president (research), Sharekhan by BNP Paribas, said that while a capital infusion was much needed, the pricing and timing of the same was still not clear. The asset quality picture continues to be weak, and substantial increase in credit cost guidance underlines the concern.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel