Yes Bank Rejects $1.2 Billion Investment Offer From Erwin Singh Braich
Private sector lender Yes Bank Ltd. failed to conclude its fund raising once again as it rejected one large offer it had previously received, while leaving the fate of second investment proposal hanging.
Instead, the lender said it would now look to raise Rs 10,000 crore via a qualified institutional placement in one or more tranches.
Following a board meet on Friday, Yes Bank said it has decided not to proceed with a $1.2 billion investment offer it had received from Canadian investor Erwin Singh Braich and SPGP Holdings in November 2019. The offer had been disclosed to stock exchanges on Dec. 2 as the largest part of $2 billion in investment offers received by Yes Bank.
The bank has received an updated proposal from the Investor (Erwin Singh Braich / SPGP Holdings) extending the validity of its offer until January 31, 2020 for the bank’s consideration and further evaluation. However, the Board has decided not to proceed with the offer.Yes Bank Statement
The investment offer by Citax Holdings, which had offered to put in $500 million, has also not been concluded.
“The relevant conditions precedent could not be completed as on date. Hence, Citax offer will be taken up during the next round,” the bank said in its notification.
The bank’s statement was silent on other offers it had disclosed after the Dec.2 board meet. At the time, the lender had said that it has received offers from an unnamed ‘top-tier US fund house’ ($120 million), Discovery Capital ($50 million), Ward Ferry ($30 million).
Back To Square One?
With the failure to conclude the preferential issue as planned, the bank continues to hunt for capital.
The board, in its statement, said that it will seek shareholder approval to raise Rs 10,000 crore through sale of securities under qualified institutional placement (QIP), global depository receipts (GDR), American depository receipts (ADR), foreign currency convertible bonds (FCCB) or any other method, on a private placement basis.
The bank’s common equity Tier-I capital ratio as on September 30, 2019 stood at 8.7 percent. Banks are required to maintain a CET-1 ratio of 8 percent minimum. The bank’s management has already estimated a higher bad loan ratio owing to unexpected developments in cases like Cafe Coffee Day, Cox & Kings, CG Power, among others.
Yes Bank’s BB and below rated book stood at over Rs 30,000 crore at the end of the second quarter, with more than 25 percent likely to go bad. The bank’s last reported gross non-performing asset ratio was at 7.39 percent as of the end of September 2019, up from 5 percent in June 2019.
On Friday, Uttam Prakash Agarwal, an independent director on the bank’s board and the head of its audit committee submitted his resignation, citing corporate governance concerns in the bank. In an interview with BloombergQuint, Agarwal said that the bank had not followed due process in the management of the capital raising plans.
In a stock exchange notification after Agarwal’s resignation, the bank said that it was in the process of reviewing the audit committee chair’s fit and proper status after the Reserve Bank of India directed it to do so.