YES Bank to raise $500 million this year

To raise money through GDRs in combination with a QIP and share sale to domestic institutional investors

YES Bank on Monday said its shareholders has approved a $500-million fund raising plan during the current year. The move will allow the bank’s’ promoters to pare their stake and diversify its capital sources.

The private lender plans to raise the money through global depository receipts, in combination with a qualified institutional placement and share sales to domestic institutional investors. “This would be in accordance with the bank’s financial strategy to broadbase and diversify its capital sources across all investor classes,” the Bank said.

According to senior executives, the fund raising will allow the promoters of YES Bank to reduce their stake by three to four per cent. The promoter groups currently hold 25.72 per cent stake. Rana Kapoor, co-founder, managing director and chief executive of YES Bank, currently holds 13.72 per cent of the shares in the bank, while Madhu Kapur (widow of co-founder Ashok Kapur) has 12 per cent. By the Reserve Bank of India’s (RBI) guidelines, promoters of a private bank need to cut their stake to 10 per cent over a period of time. The bank needs to indicate a timetable for doing so.

Last week, promoters Rana Kapoor and Madhu Kapur were engaged in a public dispute over board membership and it was not immediately clear if both would be allowed to keep 10 per cent stake each in the bank. Experts said this was a unique situation and RBI’s norms could be interpreted differently. “As per section 6 of the Companies Act, Rana and Madhu cannot be considered as related parties. Also, in the current situation, they cannot be viewed as acting in concert. Hence, I believe both Rana and Madhu can hold 10 per cent stake each,” a senior executive with a global consultancy said, requesting anonymity.

YES Bank closed 2012-13 with a capital adequacy ratio of 18.3 per cent. Its tier-I ratio was 9.5 per cent.