YES Bank on track to raise $1 bn by way of a share sale: CEO Ravneet Gill

On its large size of below investment grade exposure, Gill said their non-investment grade figure went up from Rs 6,000 crore to Rs 20,000 crore and it was not a very granular portfolio

Newly appointed Yes Bank CEO and MD, Ravneet Gill is confident that the bank will be able to come out of the present crisis and maintain its guidance on cleaning up its books and margins. In an interview with Abhijit Lele and Dev Chatterjee, Gill says the bank will be able to come out of the NBFC and stressed portfolio crisis in two quarters. Excerpts.

Global broking firm UBS Securities has come with scathing report on the Bank raising questions over areas like capital adequacy, credit costs, stressed portfolio etc?

The fact of the matter is that report was not discussed with us nor any thing was validated which one would expect.
 

When we gave the credit cost guidance for this year we had said that we are pegging it at 205 basis points. Of this,  80 basis points was subsumed in the March quarter and contingency provisions. For the rest of the year we will have it for 125 basis points. We stick to that guidance.
 

We still remain absolutely firm in terms of what we our credit costs are going to be.

This report is also talking about your (bank’s) lending to non-investment grade companies?
 

We wonder on what basis this is being said. Only thing we can see about non-investment grade lending is what we deem as non-investment grade. And that is very clearly articulated in results for fourth quarter (Q4Fy19).
 

Our non-investment grade figure went up from Rs 6,000 crore to Rs 20,000 crore in sub-investment grade and what we also explained that it was not a very granular portfolio. There were couple of very large names.
 

What typically happens is that created little bit of concern… if you go back to some of our peer private sector banks came up with watch list. And for several quarters this watch-list kept growing. The reason for this watch list continued to grow was very simple that they were caught in the cyclical bind in cement, steel and power. When get caught in cyclical bind till such a time that industry recovers we are also caught.
 

We have question of just handful of names which are currently experiencing little bit of liquidity challenge. They are now trying to get out of that through sale of assets, stake sale and change of ownership. And we are very confident that they will be able to achieve that in due course.  
 

By when do you expect to clean up these stressed assets?
 

We will see material progress on this over the next two quarters.

The report says that your $ 1 billion capital raise plan will not help the matters much. What's your view on this?

On what basis UBS is saying that? The fact of the matter is that currently we have an approval for 10 per cent dilution or $ one billion capital raise whichever is lower.  We have not imposed 10 per cent restriction on ourselves.

The large investors have provided guidance that if you want to go for this enabling resolution typically investors do not give more than 10 per cent dilution. But for specific deal on hand with a size and price, then they are happy to go above and that would become four-week approval process. So when we say that capital raise will not be enough what is restriction on that? I can go back to my shareholders in AGM and ask for whatever amount I want. So if I was looking for certain amount, the I can understand someone saying that will not be enough. But I am not falling for particular amount. So far somebody to say capital will not be enough, is totally unreasonable.

Also UBS has downgraded Yes Bank stock quite drastically almost to  two digits to just Rs 90 per share in next one-year price target? What's your take?

The UBS report is based on certain data point and I have fundamental disagreement with those data points. We have specifically talked about credit cost guidance, sub-investment grade book, and amount of capital we are looking to raise.

On what basis are they saying capital raise is not enough? They even do not know amount of capital we are trying to raise. So data points they have used to arrive at share price are completely divergent.

A rating agency recently came out with a statement on possible rating downgrade. It has flagged the exposure to real estate, which is going through liquidity problems, and NBFCs and HFCs which are also having liquidity issue. Is that exaggerated commentary? How you are looking at it?

In case of real estate, we have provided for wherever we thought there was weakness. And as far as NBFC exposure is concerned, they were concerned about one particular NBFC which had got downgraded to “D” category. What we are saying is that there is significant restructuring happening in that finance company in terms of change of ownership which will resolve the issue. So we are not concerned.
 

Given the experience with the exposures in realty, finance etc, what is going to be your stance for providing liquidity and support to HFCs and NBFCs and real estate sector?
 

These sectors are under pressure and we will curtail our exposures to them significantly till such a time that these sectors show robustness and buoyancy. The NBFC liquidity crisis wont hit us.