YES Bank's growth secure with balance sheet repair, QIP: Ravneet Gill

YES Bank concluded its qualified institutional placement (QIP) of Rs 1,980 crore last week, which was oversubscribed three times and will take the bank’s common equity tier-1 capital ratio to 8.6 per cent from about 8 per cent a few months ago.

“It was a job to be done and it is done,” Ravneet Gill, managing director and CEO, YES Bank said on whether the recently concluded was his most important achievement in his six months term at the bank.
 

Subscribed by names such as Societe Generale, Key Square Master Fund, BNP Paribas Arbitrage and HDFC Asset Management Company, Gill explained that some of the investors are first-time investors in the bank. “This demonstrates that that we are on the right track and we are moving ahead. The allocation process was a very deliberate one, being sure that it was towards long-only investors.”

N Jayakumar, managing director, Prime Securities one of the lead managers of the QIP, said, “Considering how some of the recent marque initial public offerings received lukewarm responses, YES Bank’s QIP is a mark of faith from investors.”

Categorically terming the round of fund infusion as growth capital, Gill believes that it gives the bank some breathing room to think about how the bank should be recapitalised further. What could also boost YES Bank’s capital is the restructuring of its loan book, an exercise currently underway and ensured that capital adequacy ratio doesn’t slip below 8 per cent in the June quarter.

While Gill is unable to quantify how much capital would be released in the process, he is hopeful that a significant portion of the watch list, now at Rs 10,000 crore, should ease up if even two of the three accounts classified below investment are resolved by September 30. “These are not accounts that have become overdue, they are promoter level funding and they don’t have the liquidity to service it. Once these promoters have liquidity back, I wouldn’t have a problem,” YES Bank has exposure to a stressed finance company and a media group. These two accounts, along with exposure to another beleaguered group, make up 80 per cent of the below-investment grade book which totaled Rs 29,000 crore as in June 2019. “These are very high-yielding assets, and we are happy with the names,” he reiterates.

But that said, at 8.6 per cent CET-1 ratio, growth may not be very substantial and could lag the industry average. “We look at growth as a combination of retail and wholesale loans. We will need to be balanced and reasonable though, in terms of growth,” said Gill. However, he is optimistic that there is enough slack to be picked from liquidity-hit non-banking finance companies or NBFCs. It plans to buy out retail portfolios from NBFCs and also look at refinancing opportunities. Doing so would also help YES Bank improve its share of retail assets, which is well below the 40 per cent mark. Gill isn’t very worried about the bank’s retail portfolio as most assets are secured.

While these are the near-term plans laid out by the newly established senior management team of the bank, Gill emphasised that the next major round of capital infusion would be towards transforming the bank on the technology front. “Transformational capital could mean bringing in an investor who could contribute significantly to enhance the capabilities of the bank. It could be a global tech company who could become our partner,” Gill asserted. How soon the plan is implemented depends on how the bank recalibrates its growth engines. Gill aspires to transform YES Bank into a high impact-low visibility bank with the technology partner roped in.