With stake sales, Yes Bank is now poised for a makeover

With stake sales, Yes Bank is now poised for a makeover

Creator Rana Kapoor in talks to sell holdings, bank could also offload stake. The promoters are prepared to amend the Article of Association, allowing new shareholders to have a board seat. Yes Bank’s shareholding structure may witness a significant churn from the year-end as creator Rana Kapoor has initiated discussions to sell part of his holding to One97 Communications Ltd, the parent of Paytm and Paytm Payments Bank.

Even though the bank then denied these reports, Mint has independently confirmed that such discussions might have really progressed somewhat.

The technology firm’s institution is expected to help further the bank’s electronic ambitions.

The bank has already been speaking to big private equity firms for capital infusion.

If Rana Kapoor does manage to sell his stake to One97 Communications, or another shareholder, it won’t make any difference to the bank’s capital structure. New equity issuance, on the other hand, will cause dilution in promoter shareholding.

According to senior executives in Yes Bank, the promoters are willing to reduce their shareholding after this stake sale and amend the articles of association, allowing new shareholders get a board seat.

“We’re open to reducing bet if the lender decides to sell a minority stake to a worldwide tech company,” Shagun Gogia told Mint. Gogia is co-promoter Madhu Kapur’s daughter along with another director on the Yes Bank board.

Rana Kapoor and his family offices maintain 10.6% stake in the bank. A person close to Yes Bank’s co-promoter Rana Kapoor’s family said the stake sale to One97 will be completed via the stake held by Kapoor and his promoter group thing Morgan Credits Pvt. Ltd (MCPL); the joint holding of both of these entities in Yes Bank is about 7.34%.

“There have been talks between Kapoor, Yes Bank and many fintech companies including One97 Communications Ltd since August,” said the individual cited earlier.

A statement issued by the lender to stock exchanges said:”The Bank in its usual and ordinary course of business continues to explore different means of increasing capital/funds via issuance of securities to varied set of investors, to be able to satisfy its business/regulatory needs, subject to compliance with prescribed procedures and receipt of statutes/regulatory approvals.”

An email sent to Yes Bank also failed to elicit an answer.

If true, the agreement will require RBI’s approval, provided that One97 holds the license for a payments lender. Questions are bound to be raised over whether the permit holder of a payments bank ought to be permitted to acquire a stake in a universal bank as it may be considered a workaround. Additionally, the widening of One97 Communication’s losses, as mentioned in Mint on Tuesday, is bound to weigh on the acceptance procedure.

Kapoor and MCPL also should obtain consent from Reliance Nippon Life Asset Management Ltd (RNAM) to sell their stake, given that approximately 7.34percent is pledged with RNAM. When contacted, an RNAM spokesperson stated,”Reliance Nippon Life Asset Management hasn’t given any consent and isn’t in conversation with anybody about Yes Bank’s pledged shares.”

Yes Bank co-promoter Rana Kapoor and his family-owned firm MCPL needed to pledge their whole 7.34percent or 170.25 million shares with RNAM. This was done because RNAM wanted to convert a previously unsecured loan (given to MCPL via non-convertible debentures) to a secured loan as the bank’s stock has dropped 80% over the last year.

This past year, MCPL increased Rs 1,160 crore by selling non-convertible debentures to RNAM.

The value of the 170.25 million shares as on Tuesday is approximately Rs 1,182.13 crore.

Yes Bank is in dire need of new capital to enhance its common equity tier-1 (CET-1) ratio satisfactorily over the statutory requirement of 7.375percent to remain afloat. The bank’s CET-1 ratio is slightly over this at around 8.6percent after it finished its Rs 1,930 crore stock sale to institutional investors last month.

On 16 August, Mint reported that the lender is seeking to raise an additional $600 million after increasing $270 million from big investors through an experienced institutional placement.

The Yes Bank stock has been falling steadily since RBI signaled in August 2018 that Kapoor’s term since the bank’s CEO wouldn’t be renewed after January 2019. Since 20 August this past year, Yes Bank stocks have dropped over 80 percent to Rs 63.10 as of Monday on the BSE.

The two MCPL and Yes Capital (India) Pvt. Ltd (that retains 3.26% in the bank) are completely owned by Kapoor’s three brothers.

In September 2018, after Yes Bank co-promoter Madhu Kapur sold part of her holding, Rana Kapoor had tweeted he considered his stocks as”diamonds”.

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