Yes Bank May Complete $1.2 Billion Capital Raise In Two Tranches
The first tranche of Yes Bank capital raise could see two private equity firms invest in the private sector lender to avoid a breach of RBI norms. (Photographer: Dhiraj Singh, Bloomberg)

Yes Bank May Complete $1.2 Billion Capital Raise In Two Tranches

Private sector lender Yes Bank Ltd. is looking to raise $1-1.2 billion as it cleans up its loan book and returns to a focus on growth. The Yes Bank capital raise, however, may be completed in two tranches to avoid excessive equity dilution for existing shareholders, said a person familiar with the matter.

Yes Bank is likely to complete the first tranche of capital raise by tapping private equity investors, while the second tranche could come via a qualified institutional placements (QIPs), as the bank had originally planned.

According to the person quoted above, the first tranche of capital raise could see two private equity firms invest in Yes Bank. At the current market price, the quantum of the capital raise targeted could mean that one single investor would end up holding more than 10 percent, which the Reserve Bank of India may not be comfortable with. As such, the bank is in talks with more than one private equity firm, this person said.

Post this round, the bank may even look at a second round of capital raise by tapping institutional investors, this person said.

BloombergQuint could not ascertain the names of potential investors. Yes Bank did not reply to an email sent on Monday.

More Manageable Pace Of Growth

The bank, which is currently in capital conservation mode, will be able to return to a focus on growth once the fundraising exercise is complete.

This growth, however, may be more modest than what was seen under the previous chief executive Rana Kapoor.

Yes Bank will be looking to grow its loan book at 20-25 percent for some time to come, bringing down its growth rate from the over 40 percent year-on-year growth seen until a few quarter ago.

Yes Bank is also in the process of adjusting its exposure to a few corporate groups, where the lender was in breach of the Reserve Bank of India’s large exposure framework, the person quoted above said.

The private sector bank will move from an asset-led growth strategy to a liabilities-led growth strategy as it aims at bringing in more retail and small business customers. It intends to do this by leveraging its 1,100 branches and mining customer data from its digital offerings such as the Unified Payments Interface (UPI). A liabilities-led growth could help the bank bring down its cost of funding by 100-150 basis points, the person quoted above said.

Yes Bank will also focus on growing its transaction banking business to garner more fee income, the person added.

In the quarter ended March 31, the bank reported a net loss of Rs 1,506 crore owing to higher provisions against stressed loans. The bank’s gross non-performing asset (NPA) ratio rose to 3.22 percent, from 2.1 percent in December 2018. Total advances rose by 18.7 percent year-on-year to Rs 2.41 lakh crore.

In September 2018, BI asked Yes Bank’s founder and MD & CEO Rana Kapoor to step down from his position by Jan. 31, 2019. Kapoor was then replaced by former Deutsche Bank India head Ravneet Gill, who assumed the top office in March.

Under Gill, Yes Bank aims to reduce its exposure to stressed conglomerates and grow more higher yielding businesses. While talking to analysts after announcing the bank’s March quarter results, Gill said that the bank aims to have at least 50 percent of its book from retail and small business loans by 2025.

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