This exercise will result in investors/s picking up the stakes above the regulatory cap and the RBI will have to take a call on a "non-conventional" investor coming on board soon.
Ravneet Gill, Chief Executive of Yes Bank, the private sector lender Yes Bank that is troubled right now is in its advanced stage of capital raising from various investors, including global tech majors, to grow its balance sheet that has been getting shrunk in the previous months.
The mid-sized lender company has been moving through a series of troubles since the month of August last year when the RBI had refused to give the co-founder and chief executive Rana Kapoor a new term and instead asked him to leave the bank by January 31, 2019.
He took over the job in March 2019, discovered many shortcomings in the balance-sheet of Yes Bank, which had to be taken care of, resulting in the bank reporting its maiden losses in the quarter of March 2019. The balance sheet size has been reduced by 4 percentage points since then as a result of the same.
In an interview, Ravneet Gill said that the new investor/s is either going to be a strategic partner, for example, a tech major or a financial investor or a deep-pocketed family office.
A proper combination of the two is most probably going to enter the bank soon, he said, choosing not to disclose the exact targets or the timelines. When asked if it will be before the end of the fiscal year, he said that will be too late and the fund infusion will happen much sooner than that.
"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 (RBI) be with an unconventional/non- conventional investor coming into the bank," he added.
Mr. Ravneet said that the bank has had "informal conversations on a no-names-basis" with the RBI on the proposed infusion and he expects the central bank to take a "reasonable" decision.
"In future banks will become technology companies with a banking license," he said while enlisting the advantages of such a transaction taking place. "These (tech) companies are feeling Yes Bank is digitally savvy, 'platformed' better and is also available for cheap valuation now," Gill added.
It can be observed that Yes Bank's share price, which had been continuously drubbing since August 2018 when Kapoor's reappointment was blocked had hit a rock bottom of Rs 32 on Tuesday, 1st October 2019. Although, on Thursday, 3rd October 2019 it rallied 33 percent to Rs 42.55 on the Bombay Stock Exchange after the management's sweet-talks in the morning. The stock was trading at Rs 404 in August 2019.
Mr. Ranveet Gill said that the stock is undervalued presently and if anything, the ongoing recovery will help to revive the confidence in the potential investors.
Gill added that the recent mayhem to the mutual funds selling pledged shares and also Kapoor nearly exiting the bank (from close to 13 percent stake his stake is down to under 1 percent now) but reiterated that the stock price does not truly reflect the bank's operational performance.
Gill said that the bank's asset quality has finally "stabilized" and it does not need capital for provisions for bad loans, but refused to part with the exact numbers citing the pre-results announcement silent period.
"I don't need capital for provisioning, what I need is growth capital...as soon as we get capital, growth will come," he exclaimed.
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image source-The Economic Times