Yes Bank not to hive off i-banking arm

Yes Bank, the home-grown lender that started operations five years ago, has put on hold its plan to hive off its investment banking (i-banking) division. It now plans to first start a brokerage business and consolidate its operations.

The lender had earlier planned to hive off the division to rope in some investors. “The hive-off may or may not take place in the near term,” said Aditya Sanghi, co founder and managing director, investment banking, Yes Bank. “It is not even under contemplation at this stage,” he said.

In the last five years, the bank has conducted more than 80 transactions in mergers and acquisitions, private equity syndication and capital market fund-raising.

Suzlon Energy’s acquisition of REPower and United Phosphorus’s acquisition of French firm Cerexagiri were some of the large deals that the bank’s investment banking arm worked on.

The brokerage has been a missing link and will help the bank get better valuation as and when it decides to divest.

“We, as a management team, have our strengths in execution and, like all our other businesses, are looking to build the brokerage business from scratch,” said Sanghi. The bank, he said, expected to start the business in the current financial year.

The bank did not disclose the money it planned to invest in the brokerage business. The lender, which rode piggy-back on Indian corporates’ overseas expansion in the last four-five years, now sees opportunity in inbound deals.

“That trend I would say has reversed. We now see a lot more foreign buyers looking at assets in India,” he said

There are foreign buyers who have operated in countries with 0-5 per cent growth rates for the last many years. So, their operating efficiencies are high and they sit on large unleveraged balance sheets and are fairly cash rich.

“They are the ones who recognise that their home markets will remain slow and they need to have a bigger presence in growth markets like India,” said Sanghi.

Given that valuations in India were subdued in comparison with what they were in 2006 and 2007, the potential buyers found reasonably attractive targets, he said.