Private equity group Advent International is evaluating a Rs 7,500 crore ($1 billion) speculation in Yes Bank to further capitalise its stability sheet as the private lender, now under the stewardship of State Bank of India (SBI), tries to stabilise operations. Yes Bank faced a run on deposits in early 2020 after which an SBI-led consortium took over in March of that year.
Advent is currently conducting due diligence and may form a consortium. Sources said the personal lender is keen to rope in at least one more bulge-bracket player for co-investing.
Current system allow non-promoters like PE players to buy up to 9.9% in banks, subject to RBI nod. The current market capitalisation of Yes Bank is Rs 33,648.74 crore. A 10% stake in the bank would thus be esteemed at Rs 3,364 crore.
Thus an speculation of Rs 7,500 crore might require Advent to be part of a consortium or seek special permission from the banking regulator.
The planned investment via a preferential allotment could be similar to Bain Capital’s investment in Axis Bank that saw the Boston-based PE major lead a consortium to pump in $1.8 billion in the wake of worsening asset quality and regulatory glare.
Yes Bank in an email response said, "We refrain from commenting on any speculative items."
Mails to Advent India head Shweta Jalan did not generate a response.
One of the sources mentioned above said a Hong Kong-based special situations fund is also among the potential funds which have been tapped, though its identity could not be independently verified.
The bilateral talks are ongoing and may fall down if the share price surges, warned the sources, or due to any other regulatory roadblock.
SBI is the largest shareholder in Yes Bank with a 30% stake, down from 48% in March 2020. There is a lock-in period of three years for SBI, which means it cannot lower its holding below 26% till March 2023. It has already ploughed Rs 7,810 crore into the bank in two tranches.
Since March 2020, Yes Bank has raised Rs 25,000 crore, including Rs 10,000 crore when SBI and a clutch of private banks invested to keep the bank afloat and a follow-on public issue of Rs 15,000 crore. Its board had on January 21, 2021, permitted a proposal to raise Rs 10,000 crore through various modes including QIP and FCCB. However, the bank was not successful in attracting investors. That approval was to lapse on February 22, 2022. In late December, the board approved an extension of the earlier proposal to raise capital in the form of equity, bond, warrants or any other equity linked security.
In case SBI decides not to infuse any more capital in the bank, then Yes Bank can immediately raise just about Rs 5,200 crore from new investor such that SBI’s stake continues at 26% — the minimum stipulated as per the Yes Bank Reconstruction Scheme, 2020. Investors can be issued warrants for future conversion or get into a structured deal linked to milestones.
"An investor like Advent will give a signal to the market. It’s a confidence booster. They will also seek board depiction like in the Bain-Axis Bank deal. Advent has been keen on the asset for a while," said an official privy to the ongoing discussions. "Plus, it’s inexpensive with significant upshot baked in. With SBI in the driver’s seat, the earlier risks connected with the bank has also vanished. Over the years, with successful trades in cards, insurance, SBI too has got comfortable with PE players."
Advent, like Blackstone and Brookfield, were among a handful of confidential equity investors that had explored buying into the bank before SBI came to its rescue.