As the private lender, currently under the leadership of State Bank of India (SBI), strives to stabilise operations, private equity firm Advent International is contemplating a Rs 7,500 crore ($1 billion) investment in Yes Bank to further capitalise its balance sheet.
In early 2020, Yes Bank had a deposit run, and in March of that year, an SBI-led consortium seized over.
Advent is performing due diligence at the moment and may establish a coalition. According to sources, the private lender is looking to co-invest with at least one other bulge-bracket company.
Non-promoters, including as private equity firms, can now buy up to 9.9% of a bank’s stock, subject to RBI approval. Yes Bank’s current market capitalization is Rs 33,648.74 crore. As a result, a 10% ownership in the bank would be worth Rs 3,364 crore.
It’s possible that it’ll be similar to the Bain-Axis deal.
Thus, a Rs 7,500 crore investment may need Advent joining a consortium or obtaining special permission from the banking regulator.
The proposed preferential allotment investment could be akin to Bain Capital’s $1.8 billion investment in Axis Bank, which saw the Boston-based PE firm lead a consortium in the face of worsening asset quality and regulatory scrutiny.
With a 30 percent interest in Yes Bank, SBI is the largest stakeholder, down from 48 percent in March 2020. SBI has a three-year lock-in clause, which means it cannot reduce its stake below 26 percent until March 2023. It has already deposited Rs 7,810 crore in two tranches with the bank.
Since March 2020, Yes Bank has raised Rs 25,000 crore, including Rs 10,000 crore from SBI and a group of private banks to keep the bank solvent, and Rs 15,000 crore through a follow-on public offering. Its board of directors authorised a proposal to collect Rs 10,000 crore through several channels, including QIP and FCCB, on January 21, 2021. The bank, on the other hand, was unable to recruit investors. That permission was set to expire on February 22, 2022.
If SBI decides not to inject more capital into the bank, Yes Bank can raise little over Rs 5,200 crore from new investors right once, ensuring that SBI’s holding remains at 26 percent, which is the minimum required under the Yes Bank Reconstruction Scheme, 2020. Investors can be given warrants that can be converted at a later date or enter into a structured contract with milestones.
In recent years, private equity firms like Baring Asia and Canadian pension funds like the Canada Pension Plan Investment Board (CPPIB) and the Caisse de dépôt et placement du Québec (CDPQ) have purchased private lenders like Kotak Mahindra Bank and RBL.
Private sector lenders have always drawn international private investments, from ICICI Bank to Yes Bank, and from ING Vysya to Centurion Bank of Punjab. Even in its previous incarnation as UTI Bank, Axis had received investments from the private equity firm ChrysCapital
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