Yes Bank Ltd.’s board today said that it’s willing to favourably consider the $500 million offer from Citax Holdings and Citax Investment Group. The board will decide on the final allocation of equity stake at its next meeting.
A $1.2-billion binding offer from Canada’s Erwin Singh Braich and SPGP Holdings is still under discussion, the board said, without clarifying whether it will approve the offer. The lender’s board, Bloomberg reported yesterday, is poised to reject the offer from the Canadian billionaire.
“The binding offer of U.S.$1.2 Billion submitted by Erwin Singh Braich/SPGP Holdings continues to be under discussion,” the board said in an exchange notification.
Braich and SPGP Holdings’ investment proposals had been questioned as there is very little public information available on Braich’s financial holdings. Moreover, SPGP Holdings has previously been unable to provide earnest money when it was bidding for Reid & Taylor under the insolvency process.
Citax Holdings had witnessed similar problems when bidding for Nagarjuna Oil Corporation of India, under the insolvency process.
“We have serious reservations regarding the quality of board of directors who are willing to consider these kinds of investors to be large shareholders,” Suresh Ganapathy of Macquarie Capital Securities had written in a note, a day after the bank announced the names of the potential investors.
The notification didn’t clarify how the bank’s board is going to treat the investment proposals worth $300 million, other than these two investors. Family offices such as the Aditya Birla family office and GMR Group had declared their interest to invest funds into the bank. Moreover, institutional investors like top tier US-based fund, Discovery Capital and Ward Ferry had also shown interest.
“The bank shall continue to evaluate other potential investors to raise capital upto U.S.$ 2 Billion,” the exchange notification said.
The bank needs the investments to ensure that it can boost its capital adequacy base, helping it to provision adequately against bad loans and support future growth.
As of Sept. 30, Yes Bank’s gross non-performing assets were at 7 percent of its total loan book, while its Tier-I capital ratio was 8.7 percent. The Reserve Bank of India had also noted that in the financial year ended March, the bank hadn’t reported Rs 3,277 crore worth loans as bad loans. The bank has also indicated that out of Rs 31,000 crore worth loans rated BB and below, a quarter could turn bad.
Moody’s Investor Service said on Dec. 5 that it has downgraded Yes Bank’s long-term ratings to B2 from Ba3. The rating agency said the downgrade “takes into account Moody’s expectation that the bank’s pool of potential stressed assets and low loss-absorbing buffers against those assets will add pressure to its funding and liquidity, creating additional risks to its standalone credit profile or BCA”.
Moody’s also said that considerable execution risks exist in the form of timing, price and regulatory approvals, as far as the bank’s fund raising plans go.
Also Read: Yes Bank Fundraising: Who Are The Investors?
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