YES Bank share sale: Erwin Singh Braich, family offices may not be included

Bank plans to raise $1.75 billion; in talks with five European institutions: Ravneet Gill

YES Bank is likely to skip issuing shares to family offices in favour of institutional investors in the current round of its preferential issue, where the bank plans to raise $1.75 billion, its managing director and chief executive officer, Ravneet Gill, has said.

This means Erwin Singh Braich, GMR Group, and Aditya Birla Family Office, which had all put in bids, may not get a piece in the bank's stake sale.  

Denying reports of a forced merger being thrust upon the bank, he said he was confident of raising the target funds soon.

“Large European financial institutions regulated by the Financial Conduct Authority have shown an interest in the bank,” Gill told Business Standard in an interview. "Since the talks are at an advanced stage, the bank will reveal the names of these investors once it enters into a binding agreement with them," he added.

It is understood that YES Bank has received an interest from four to five financial institutions, and one of them could take as much as 10 per cent in the bank. Others are expected to pick up a 4-5 per cent stake each.

Gill said that since these investors are well-governed and established names, they should pass the ‘fit and proper’ test of the Reserve Bank of India.

"When these bids become binding and once we disclose the names, then nobody would have any concerns with regard to the quality of investors or their ability to put in the money. So, it will effectively put a lid on the issue once and for all," Gill said.  

Braich had bid for $1.2 billion in the proposed $2-billion stake sale, while the Citax group evinced interest to the tune of $500 million. Other family offices were to put in about $100 million, according to a YES Bank release.

Gill said, “As far as Indian investors and family offices are concerned, we have told them that for this capital raise, we have to go for the institutional route.”

He also feels that the $500 million committed by London-based Citax Holdings and Citax Investment Group should also pass the regulatory muster. “We will not trip on regulatory issues,” he said.

"Right now, we have made no recommendations to the board in terms of either accepting or not accepting the bid. We just feel that before we take any decision, we should take a considerate call on the matter", Gill said about the Braich's offer.

The bank has a repayment obligation of over Rs 300 crore with respect to its additional tier-1 (AT-1) bonds by December 23, 2019, a liability which it is, for now, confident of meeting on time.
 

Capital-related issues apart, in about a month from now, as the December quarter (Q3) earnings season kicks off, the bank will face another test —that of asset quality.

YES Bank has already recorded slippages (loans turning bad) of over Rs 12,000 crore in the first half of FY20. Loans worth Rs 30,000 crore have been earmarked by the bank as stressed as of September 2019. These largely fall in the below investment grade category.

When asked if the bank expects the pace of slippages to increase in Q3 or the pool of stressed assets to increase, Gill replied that with no fresh trouble emerging lately, neither of these parameters should increase much.
 

“As far as Indian investors and family offices are concerned, we have told them that for this capital raise, we have to go for the institutional route”

- Ravneet Gill, MD & CEO, YES Bank