India Bank's Credit Rating Cut Again Just as It Needs More Capital

(Bloomberg) -- A Deutsche Bank AG veteran’s challenge to help a troubled Indian private lender regain its footing may have got tougher.

Yes Bank Ltd.’s credit rating has been cut for the second time this year by ICRA Ltd., the local unit of Moody’s Investors Service, stifling the lender’s ability to boost capital buffers that have shrunk to near the lowest allowed by regulators.

That’s as the 53% plunge in the bank’s stock price this year has complicated Chief Executive Officer Ravneet Gill’s efforts to raise the planned $1.2 billion through a mix of public and private share sales. Gill took the helm March 1 after running Deutsche’s India unit for more than six years.

“Raising capital through bonds will be challenging as the lower rating reduces the pool of investors for their debt,” said Ravikant Anand Bhat, senior analyst at Indianivesh Securities Ltd. “Capital is the need of the hour for Yes Bank. Without that they won’t be able to grow.”

Yes Bank’s need for funds comes at a time when the nation’s credit market is still grappling with the knock-on effects of a crisis among shadow lenders. The bank itself has a sizable exposure to the cash-strapped industry. Bloomberg Intelligence analyst Diksha Gera expects the lender’s credit costs to stay high in the year to March due to an increase in stressed assets.

To read more about Yes Bank’s plans to raise $1.2 billion capital

Yes Bank last week in an exchange filing said it is exploring various means of raising capital. A spokesman for the lender declined to comment.

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