Yes Bank’s fundraising plans may see some delay as private equity (PE) investors Blackstone Group, Apax Partners and Warburg Pincus are seeking more details of the bank’s exposure to stressed loan accounts before committing to an equity infusion, according to a report by Livemint.
“The PE investors have raised concerns about some stressed accounts, which they fear can create a bigger-than-expected hole in the bank’s balance sheet unless resolved suitably,” the report quoted a person directly aware of the negotiations as saying. “For some of these accounts, the bank has begun provisioning, but a final outcome is still awaited in many of these cases.”
The report said that the buyout firms are looking to invest between $500 million and $750 million in Yes Bank, depending on the final valuation.
The equity infusion is expected to help Yes Bank improve its ability to absorb future losses at a time when the bank’s CEO Ravneet Gill is effecting a cleanup of its balance sheet, resulting in the lender reporting its first quarterly loss of Rs 1,506 crore in the March quarter, said the report. Yes Bank’s gross non-performing assets (NPAs) stood at 3.22% during the March quarter against 2.11% in the preceding quarter.
According to the report, Yes Bank has an exposure of over Rs 2,600 crore to various special purpose vehicles of Infrastructure Leasing and Financial Services (IL&FS), which is being investigated for fraud.
“The prevailing uncertainty could delay the bank’s fundraising plans from PE investors and could potentially rule out any hopes of a premium over the current market price,” the report quoted another person as saying.
At 11:33am, shares of Yes Bank were trading at Rs 115.40 apiece, up 0.3%, on BSE. Foreign brokerage firm UBS had cut its target on the stock price last week to Rs 90, down 47% from its earlier forecast of Rs 170.
Notably, UBS had raised FY20 credit cost estimate for Yes Bank to 250 basis points from 200 basis points earlier, higher than the management guidance of 125 bps.
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