The buzz that Yes Bank is in advanced stages of raising capital to fix its shrinking balance sheet is getting louder. The troubled private sector lender has reportedly been in talks with three global tech majors, including Microsoft Corp, for three weeks. Sources aware of the discussions told Mint that the bank could sell as much as 15 per cent stake through fresh equity issuance if the talks are productive. Yes Bank has also appointed investment bankers to shortlist the global tech firm.
"The stake sale may fetch the bank around Rs 2,000 crore but, more importantly, such a deal may help the bank work on its digital banking and payment system plans," said sources, adding that the strategic partner may be allotted a board seat in Yes Bank.
The RBI is aware of the bank's plans. On Friday, Yes Bank's CEO Ravneet Gill told PTI that the lender has held "informal conversations on a no-names-basis" with the regulator on the proposed capital infusion and he expects the central bank to take a "reasonable" decision. "The two things that we need to address is the single ownership for an equity holder, and the second thing is how comfortable would they [the RBI] be with an unconventional/non-conventional investor coming into the bank," he said.
According to Gill, who took over in March - around the time Yes Bank reported its maiden loss for Q4 FY19 - the new investor or investors will either be a strategic partner like a tech company or a financial investor or a deep-pocketed family office. "A combination of the two is most likely to enter the bank soon," he explained, adding that the fund infusion will happen "much sooner" than the end of this fiscal. He firmly believes that in future "banks will become technology companies with a banking licence".
Yes Bank's cheap valuation seems to be a lure for the global tech firms. The lender's share price has received continuous drubbing over the past 14 months, ever since the RBI blocked reappointment of co-founder and former CEO Rana Kapoor. The stock is currently trading at around Rs 43 apiece on the BSE, down over 89 per cent from Rs 404 last August. The bank's balance sheet size has shrunk by around 4 percentage points in the same period, exacerbating the need for capital infusion in the near future. The lender, in fact, has announced plans to raise up to $1.2 billion.
In the meantime, Yes Bank has filed a complaint with the Mumbai Police and cyber cell against "fake news and spread of rumours about the bank's financial health on WhatsApp and other social media platforms". The complaint was filed in the light of promoters cutting their stake and lenders to the bank revoking its shares pledged with them, causing the stock to take a heavy beating over the past few days. In a regulatory filing on Sunday, Yes Bank said that it has requested the authorities to form a multi-disciplinary team of experts for detecting the origin of the fake news and assess the short-sell positions, held either directly or indirectly by such accused persons.
Yes Bank's fire-fighting plans now hinge on regulatory approvals. Since talks between Yes Bank and Microsoft entail a potential stake sale of up to 15 per cent, RBI approval will be mandatory - any stake purchase of more than 5 per cent in a bank requires the apex bank's nod. Speculation is rife that the RBI may allow this stake sale subject to certain caveats. "For instance, the RBI may ask the tech company to reduce its stake gradually within three years to 5 per cent or so. Yes Bank is willing to comply with that," a source told the daily.
Reacting to the news about a possible cash infusion on the cards, Yes Bank's share price spiked 9.01 per cent to Rs 45.95 apiece in early trade on Monday.
With PTI inputs