Private sector lender Yes Bank is aiming to finish a $1.2 billion (about Rs 8,462 crore) equity raising exercise by December and willing to give new investors a board seat, according to a top official.
The bank, which has claimed that it is in discussions with potential suitors who are willing to pump in up to $3 billion (around Rs 21,156 crore) collectively, said it may raise the money either through the North American family office, which has made a binding offer to pump $1.2 billion, or through a combination of investors.
The other investors include private equity funds, domestic mutual funds, domestic financial investors and also domestic family offices.
"We have to inform the North American family office by end of November. We will raise $1.2 billion by end of December and it may be either from them or a combination of investors," its chief executive Ravneet Gill told a select group of reporters over the weekend.
He said the money raised will suffice the bank for two years, after considering its aim to expand the loan book to "high-teen" levels, Gill said, asserting that the asset quality issues are under check now.
The newly appointed head, who replaced promoter-chief executive Rana Kapoor whose conduct had raised RBI's concerns, said the binding offer was received last Thursday over email and chose to disclose it to exchanges as it was advised that it was price sensitive.
As part of the offer, the family office has also attached a letter from a major US bank with which it has a long relationship, affirming the former's ability to pay the promised sum, Gill said, adding that the family office has a "multi-billion" networth.
Elaborating on the way ahead, Gill said a board committee on capital raising will be meeting next week to consider both the binding proposal and also the other ones which it has.
It will accordingly disclose the names of the chosen investors after discussions with the RBI, he said, stressing that the investment is "financial" alone and not strategic in nature.
A $1.2 billion equity infusion will lead to an expansion of the common equity tier-I reserves by 2.60 per cent and give the new shareholder(s) a 33 per cent stake in the bank, Gill said, adding that correspondingly, the existing investors' holding will get diluted by one-third.
Gill said the voting rights of the investor(s) will be capped at 15 per cent, and it will not be difficult to convince the RBI to allow an investor with such a big holding in the bank.
The investment may also not trigger an open offer, because of the cap on voting rights of the investors, he said.
There are precedents like Catholic Syrian Bank, where the regulator has allowed large foreign investors, he said.
He note that the new investor may not be called as a "promoter", going by the precedents.
The bank may either go for the two-week average or a six month average while deciding on the price for the share sale, Gill said, adding that he is hopeful of the shares which have taken a battering in the last year being sold at a premium.
The share sale will be mostly through a preferential issue of shares, he said, conceding that an institutional placement of shares is also on the table.
Gill said the family office has asked for a seat on the board of the bank against the stake. Private equity investors, who are amongst the three options of investors, have also asked for a board seat and the bank is comfortable with taking them on the high table, he added.
All the investors have done a thorough due diligence of the books, he said
Gill said it has got a binding offer only from the family office and has also signed a non-disclosure agreement as part of the same.
When asked about speculation of Singaporean lender DBS being interested in buying stake, Gill laughed it off and denied.
In a statement, DBS also denied the speculation as "unfounded and baseless" rumour.
On asset quality, which continued to plague the bank even in the second quarter, Gill said there is no watchlist per se and its exposure to corporates rated below investment grade is Rs 31,000 crore which will not be going up.
He, however, conceded that the same book has risen from Rs 29,000 crore in a single quarter as stress cases like CG Power, Cafe Coffee Day and Cox and Kings taking it by surprise.
"We got hit by every torpedo that was fired," he said.