YES Bank pares fundraising target to Rs 10,000 cr; junks Erwin Braich offer

YES Bank on Friday scaled down its fundraising plan substantially to Rs 10,000 crore, from nearly to $2 billion approved by the board in November, as it continued with its struggle to get investors. 

The bank notified the exchanges that its board approved raising of funds up to Rs 10,000 crore, in one or more tranches, through Qualified Institutions Placement (QIP), Global Depository Receipts (GDRs), American Depository Receipts (ADRs), Foreign Currency Convertible Bonds (FCCBs), or any other methods on private placement basis. 

The bank will hold an extraordinary general meeting for this purpose.  The bank also said it received an updated proposal from Erwin Singh Braich and SPGP Holdings, but “decided not to proceed with the offer.” 

However, it is “willing to favourably consider the offer of $500 million of Citax Holdings and Citax Investment Group and the final decision regarding allotment to follow in the next Board meeting, subject to requisite regulatory approval(s).”

The Citax offer will be taken on next round as the “relevant conditions precedent could not be completed as on date.” 
 

This is a remarkable scale down by the bank, which urgently needs capital, but has failed to get so. The bank's core equity capital is at 8.7 per cent, against the minimum regulatory requirement of 8 per cent. 

The bank’s management in November had said that it received binding offer of $1.2 billion, with total interests of nearly $3 billion. Ravneet Gill, YES Bank’s CEO and managing director had said that the bank expected to close the deal by the end of calendar year.

However, a letter dated January 9 by Uttam Agarwal, an independent director and chairman of audit committee on the board of the bank, alleged that Gill might have misled the board, and shareholders. The letter alleged that the bank really did not have any credible offer, and that the investors that showed interest did not seem to be strong enough to invest the money in the bank. No due diligence was done on these investments and there was no firm commitment. 

Three other investors were interested in investing in debt papers of the bank, and not equities.  The bank’s stock fell 5.29 per cent to close at Rs 44.80 a piece on the BSE. Meanwhile, Morgan Stanley had in the morning cut the share price target to Rs 25.

“We remain underweight on YES Bank given the delay in capital raising and elevated asset quality stress,” Morgan Stanley said.