You are here: Home » Markets » News
Business Standard

YES Bank jumps 6% as Carlyle, Advent International to infuse $1.1 billion

Consequent to the capital infusion, YES bank's CET-1 ratio (based on FY2022) would improve by 380bps to 15.4 per cent and total capital adequacy ratio would improve to 21 per cent

Topics
Buzzing stocks | YES Bank | Markets

SI Reporter  |  New Delhi 

YES Bank

Shares of surged 6 per cent to Rs 15.8 apiece on the BSE on Monday as the lender's Board decided to sell up to 10 per cent stake to US private equity firms Carlyle Group Inc and Advent International for $1.1 billion.

At 9:35 AM, shares of were up 2.7 per cent as against 0.3 per cent gain in the benchmark S&P BSE Sensex. A combined 86.92 million shares had changed hands on the NSE and BSE till the time of writing of this report.

" will raise the funds through a combination of about $640 million in shares and about $475 million in share warrants. It will offer 3.69 billion shares to affiliates of Carlyle Group and Advent. The company will also issue 2.56 billion share warrants at a price of Rs 14.82 per warrant to both the investors," the private lender said in a statement.

Consequent to the capital infusion, the bank’s CET-1 ratio (based on FY2022) would improve by ~380bps to 15.4 per cent and total capital adequacy ratio would improve to 21 per cent. The impact on book value per share is quite negligible given that the stock is trading closer to book value but the infusion would result in ~15 per cent dilution to EPS keeping all other variables unchanged.

"This, along with the recent announcement of transferring bad loans to an ARC can result in the bank putting back all its legacy issues. However, the bank still needs to build a strong liability franchise and invest in key resources to compete on like-to-like basis. This would take time as the bank lacks a strong profitable moat," said analysts at Kotak Institutional Equities.

It added that nearly all mid-tier banks are stepping up their growth engines and looking at faster normalization of long-term return ratios. YES Bank, it said, is also in a similar situation with the only exception with no strong profit pools readily available.

"There is a possibility of long periods of low credit costs if the recovery of bad loans from the sale of ARCs is better-than-anticipated. However, it is too early to forecast them. This lack of differentiation and a valuation that reflects the current situation prevents us from being constructive," it said with a "sell" rating and a fair value of Rs 13.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, August 01 2022. 09:47 IST
RECOMMENDED FOR YOU
.