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YES Bank seeks $75-mn debt from IFC to augment capital base

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has approached the World Bank group member, (IFC), for a $75-million loan to augment its capital base and to prepare it for Basel-III implementation.

The loan has been sought to improve the maturity mismatch position and grow assets, increase reach and improve market share, especially in the small and medium enterprise and agricultural space. The board is slated to take it up on March 9.

YES Bank said the proceeds of IFC’s funding would be utilised to finance its customers in the SME and agricultural sectors. IFC’s investment would thus ensure continued and an increasing access to finance to the SME sector in increasingly challenging credit environment.

The bank plans to expand branch network to 750 by FY15, targeted towa-rds expanding its SME, agriculture and retail franchise. The bank also proposes to primarily expand in smaller cities and centres, where it expects to tap SME and agriculture business. Much of the expansion will be in the states of Maharashtra, NCR, Gujarat, Rajasthan, Haryana, Uttar Pradesh and Madhya Pradesh.

YES Bank officials confirmed the development. “It is a 15-year debt. The size is $75 million. The primary objective is to strengthen our tier-II capital base,” a senior official of YES Bank told Business Standard. The coupon rate has not yet been fixed, the official added.

IFC on its website said the UT2 debt is expected to provide the bank with long-term funding with a tenor and of an amount currently not available in the international markets. IFC’s long-term financing would help the bank to diversify its funding base and improve its asset liability profile.

The private sector lender closed the third quarter of this financial year with a capital adequacy ratio of 16.1 per cent. The tier-I ratio was 9.2 per cent. The bank had raised Rs 243 crore lower tier-II capital from banks, insurance companies, provident funds, and corporates.

The fundraising from IFC is not the first time that YES Bank is raising capital from abroad.

In September 2009, the bank raised upper tier-II capital of $20 million from Proparco, the private sector investment arm of French development finance institution, Agence Francaise de Develop-pement. The bank raised debt of ^20 million from DEG, a member-firm of Germany’s development finance institution, KfW Bankengruppe, in October 2009. It also availed of a $25-million term loan from the US-based Wells Fargo Bank in 2010.

“These were fairly unique, small-ticket transactions. They have enabled us to open doors with key long-term fund providers, offering either quasi capital or long-term debt capital. We endeavour to work with more institutions like these and increase the ticket size,” Rana Kapoor, founder, managing director and chief executive officer, YES Bank, told Business Standard in an earlier interview.

He said these funds were generally used to finance the bank’s SME clients.

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