Private lender Yes Bank Ltd. is in talks with foreign funds, including the Carlye Group, to raise capital, according to a person with direct knowledge of the matter.
The bank is discussing options for such an investment with potential investors, with the option to infuse funds via convertible debt also on the table, the person told BQ Prime on the condition of anonymity. That allows an investor to convert debt securities into equity at a later date.
A final decision in this regard is yet to be made, the person quoted above said.
Emails sent to Yes Bank and Carlyle weren’t immediately answered. CNBC-TV18 first reported on Friday that Yes Bank was in talks with Carlyle for a potential investment.
In December 2021, the bank’s board had approved Rs 10,000 crore in capital-raise by issuing instruments including equity shares, warrants, convertible bonds, debentures, etc. Under the reconstruction plan, investors who come in as part of the scheme have 75% of their shares locked in for three years. State Bank of India, the largest investor, is required to hold a minimum of 26% for this period.
Given these conditions, an investment via convertible securities may be preferable.
While investors are keen to conclude the transaction soon, Yes Bank has not committed to anything. This is because the bank feels that current market conditions will impact the valuation of the lender.
The bank feels that it can wait for some more time since it has adequate capital to support growth for the time being, the person said.
As of March 31, Yes Bank’s capital adequacy ratio stood at 17.4%, where the common equity Tier-1 capital ratio was 11.6%. FY22 was also the first year of profit reported since the bank underwent a reconstruction plan in March 2020.
On July 15, the bank will seek shareholder approval to form a new board, as it exits the reconstruction plan. This new board will help Yes Bank conclude the equity raise, Sunil Mehta, outgoing chairman of the bank, had said in an interview last week.
It is also in the midst of forming an asset reconstruction company with JC Flowers & Co. to offload Rs 48,000 crore worth of stressed loans, BQ Prime had reported. That will help the bank bring down its gross non-performing asset ratio to zero from 13.9% currently, and rid the balance sheet of legacy stress.
U.S.-based private equity investor Carlyle Group was previously keen on investing in PNB Housing Finance. However, that transaction eventually fell through due to questions raised by the Securities and Exchanges Board of India.
On Friday, the Yes Bank stock closed at Rs 12.45 per share, down 0.48%, tracking the decline in benchmark Nifty 50.