YES Bank board clears Rs 5,000 cr capital raising plan in multiple tranches

Strategic plan to factor in Covid-19 impact

Ailing private sector lender YES Bank will raise up to Rs 5,000 crore as equity capital in the second round to meet regulatory requirement and support business.

The board, at its meeting on Thursday, approved  raising of funds for an additional amount aggregating up to Rs 5,000 crore in one or more tranches, by issuing securities, the bank informed the exchange. Its shares closed 10.27 per cent lower at Rs 26.65 per share on the BSE.

The bank has kept options open to use routes like qualified institutional placement, public issue, rights issue, global depository receipts, American depository receipts, and foreign currency convertible bonds or any other permissible mode, it added.

Its reconstituted eight-member board held a nine-hour-long meeting via videoconference. Besides enabling resolution for capital raising, the directors dwelled on employee concerns and work being done by them in trying times, said banking sources.

The bank is a board-driven company. Earlier, it was run by administrator Prashant Kumar under the reconstruction scheme, which came into effect on March 5.  Kumar is now the managing director and chief executive officer of the bank.

While the bank had prepared the broad contours of a strategic plan, the COVID-19 outbreak has added new challenges. The management will begin a dialogue with investment bankers to chalk out a plan for raising fresh capital and assess market appetite for shares from the bank, said sources.

According to rating agency ICRA’s estimates, YES Bank will require equity infusion of Rs 9,000-13,000 crore to meet regulatory capital requirements, including capital conservation buffers (CCB). The regulatory norms require banks to maintain a CCB of 2.5 per cent as on March 31.

Early this month, the bank received an equity infusion of Rs 10,000 crore from eight domestic banks, led by State Bank of India. The bank has a write-down of AT-I bonds. This is expected to improve capital ratios — common equity tier-1 (CET-1) and Tier-1 of 7.6 per cent and 7.8 per cent, respectively. The capital adequacy ratio (CAR) will be more than 9 per cent.

YES Bank’s regulatory CAR (Basel III) stood at 4.1 per cent (CET-1 of 0.6 per cent and Tier-I of 2.1 per cent) as on December 31, 2019.