State Bank of India (SBI) on Thursday approved an investment of ₹7,250 crore in Yes Bank Ltd, as part of a rescue plan for the troubled lender.
The executive committee of the board of India’s largest lender approved the purchase of 7.25 billion equity shares of Yes Bank at ₹10 apiece, subject to regulatory approval. SBI’s stake in Yes Bank will remain within 49% of the paid-up capital of the bank, the state-run lender told stock exchanges.
Under the Reserve Bank of India (RBI)-supervised ‘Yes Bank Ltd Reconstruction Scheme, 2020’, SBI is required to maintain at least 26% stake in Yes Bank for a period of three years. SBI’s proposed plan was to invest a minimum of ₹2,450 crore to begin with and a maximum of ₹10,000 crore for 49% stake in the bank.
Separately, SBI is also in talks with domestic and foreign investors to infuse equity capital into the bank. Mint had reported on Thursday that HDFC Ltd and Kotak Mahindra Prime will each invest ₹2,000 crore in Yes Bank, according to a rescue plan prepared by SBI.
“The investors, including SBI, will bring a total of ₹12,000-15,000 crore worth capital in the first round of capital raising. The remaining capital requirement will be met through a qualified institutional placement post the bank’s results on 14 March," according to a banker aware of the matter.
On 7 March, SBI chairman Rajnish Kumar said that as many as 23 investors had shown interest in investing in Yes Bank. Those planning to invest more than 5% in the bank will have to come under the ‘fit and proper’ criteria formulated by RBI, he said.
Last week, RBI superseded the board of Yes Bank and named Prashant Kumar as administrator to run its affairs after its financial position deteriorated. The regulator also capped deposit withdrawals up to ₹50,000 crore till 3 April.
According to a report by JPMorgan on 5 March, Yes Bank will require as much as ₹17,500-21,000 crore in capital. “Taking a conservative view of the stressed pool at Yes Bank ( ₹45,000-50,000 crore), we believe the net worth ( ₹27,000 crore) can buffer most of the losses realized from the stress book at the bank. However, capital will still be required to recapitalize it, which in our view could be $2.5-3 billion if AT1 is not converted," the report said.
“We believe SBI’s ₹7,250 crore equity commitment to Yes Bank is based on the Q3 internals, due diligence already done, and likely equity commitments from investors that SBI chairman alluded to in his press conference. Hence, there could be a matching or higher equity investment from non-SBI investors. It may be noted that Yes Bank’s sub-investment grade book in Q2FY20 stood at ₹31,400 crore or 88% of its Tier 1 capital. Hence, although the planned equity infusion appears meaningful, whether it would suffice would be known once the bank presents its Q3 results," said Ravikant Anand Bhat, an analyst at IndiaNivesh Fund Managers Pvt. Ltd.
The executive committee of the board of India’s largest lender approved the purchase of 7.25 billion equity shares of Yes Bank at ₹10 apiece, subject to regulatory approval. SBI’s stake in Yes Bank will remain within 49% of the paid-up capital of the bank, the state-run lender told stock exchanges.
Under the Reserve Bank of India (RBI)-supervised ‘Yes Bank Ltd Reconstruction Scheme, 2020’, SBI is required to maintain at least 26% stake in Yes Bank for a period of three years. SBI’s proposed plan was to invest a minimum of ₹2,450 crore to begin with and a maximum of ₹10,000 crore for 49% stake in the bank.
Separately, SBI is also in talks with domestic and foreign investors to infuse equity capital into the bank. Mint had reported on Thursday that HDFC Ltd and Kotak Mahindra Prime will each invest ₹2,000 crore in Yes Bank, according to a rescue plan prepared by SBI.
“The investors, including SBI, will bring a total of ₹12,000-15,000 crore worth capital in the first round of capital raising. The remaining capital requirement will be met through a qualified institutional placement post the bank’s results on 14 March," according to a banker aware of the matter.
On 7 March, SBI chairman Rajnish Kumar said that as many as 23 investors had shown interest in investing in Yes Bank. Those planning to invest more than 5% in the bank will have to come under the ‘fit and proper’ criteria formulated by RBI, he said.
Last week, RBI superseded the board of Yes Bank and named Prashant Kumar as administrator to run its affairs after its financial position deteriorated. The regulator also capped deposit withdrawals up to ₹50,000 crore till 3 April.
According to a report by JPMorgan on 5 March, Yes Bank will require as much as ₹17,500-21,000 crore in capital. “Taking a conservative view of the stressed pool at Yes Bank ( ₹45,000-50,000 crore), we believe the net worth ( ₹27,000 crore) can buffer most of the losses realized from the stress book at the bank. However, capital will still be required to recapitalize it, which in our view could be $2.5-3 billion if AT1 is not converted," the report said.
“We believe SBI’s ₹7,250 crore equity commitment to Yes Bank is based on the Q3 internals, due diligence already done, and likely equity commitments from investors that SBI chairman alluded to in his press conference. Hence, there could be a matching or higher equity investment from non-SBI investors. It may be noted that Yes Bank’s sub-investment grade book in Q2FY20 stood at ₹31,400 crore or 88% of its Tier 1 capital. Hence, although the planned equity infusion appears meaningful, whether it would suffice would be known once the bank presents its Q3 results," said Ravikant Anand Bhat, an analyst at IndiaNivesh Fund Managers Pvt. Ltd.
