Morgan Credits (MCPL), the promoter firm of YES Bank, sold Rs 337 crore worth of shares of the lender in a bulk deal on Thursday. This was to prepay a certain part of its outstanding dues to Reliance Nippon Life AMC (RNam). The share sale aggravated the selling pressure on YES Bank, as a result of which its share price closed 15.5 per cent lower.
Rana Kapoor, who holds 4.31 per cent stake in YES Bank
(according to a recent QIP offer document) in his individual capacity, said in a statement: “With the sole intention of reducing debt of the promoter holding company MCPL, owned by my three daughters, it was decided to bring down our family ownership in YES Bank
to 7.4 per cent.”
Radha Kapoor-Khanna, director of MCPL and Kapoor’s daughter, said: “We have concluded the stake sale solely to de-leverage MCPL. Through the prepayment of NCDs of RNam, we have significantly reduced our borrowing in MCPL in an accelerated manner.” According to Value Research, RNam’s exposure to MCPL stood at Rs 913 crore as of August. The four schemes of the fund house exposed to MCPL were Reliance Credit Risk Fund, Equity Hybrid Fund, Equity Savings Fund, and Ultra Short Duration Fund.
On September 17, CARE Ratings downgraded MCPL’s non-convertible debentures (NCDs) from “A-” to “BBB-”. The revised rating accounted for the moderation in equity cover due to the fall in the price of underlying shares of YES Bank.
These shares were part of the structured obligations as credit enhancement.
According to the rating note, these NCDs are Zero Coupon Bonds, which were set for maturity on April 19, 2021. However, the sharp correction in the YES Bank stock had hit the equity cover on these exposures.
The stock closed at Rs 79.45 per share on August 16, around the time when it raised fresh equity capital. A little over a month, the stock is down almost 32 per cent, at Rs 54.15.
On July 18 and July 22, Morgan Credits had pledged 70,250,000 of equity shares in favour of Milestone Trusteeship Services (debenture trustee), which represented its entire stake in YES Bank. On July 18, Rana Kapoor had also pledged his entire stake of 100,000,000 shares.
According to disclosures, YES Capital — the other promoter entity — has none of its shares pledged. As of August, Franklin Templeton MF had Rs 247 crore of exposure to the entity.
Earlier, reports had suggested that RNam had asked YES Bank promoters to top up collateral by Rs 500 crore, following the fall in share prices. As of August 15, the entity had 2.75 per cent stake in the lender.
At the individual scheme level, Reliance Ultra Short Duration Fund had 7.89 per cent of assets exposed to the firm. Equity Hybrid Fund had 6.17 per cent exposure, while Equity Savings Fund had 2.54 per cent and Credit Risk Fund had 0.8 per cent of scheme exposure.