Yes Bank eyes $600 mn more after raising $270 mn from marquee investors

Mumbai: Yes Bank Ltd is planning to raise an additional $600 million from large investors to bolster its capital buffers, two people directly aware of the lender’s capital raising plans said.

The bank plans to raise more funds after its qualified institutional placement (QIP) offering that closed on Wednesday was oversubscribed, the people said on condition of anonymity. Yes Bank raised about $270 million in the fundraising.

“In the next few weeks, Yes Bank will reach out to shareholders to secure a fresh approval for another capital raising plan," said one of the two people cited earlier.

The bank has gained some confidence after mopping up $270 million through the QIP despite the weakness in the overall equity market.

Since the dilution of shareholding will be much larger in the proposed upcoming capital issuance than this one, the bank is looking to bring in strategic investors who could support the bank’s growth, said the first person.

A Yes Bank spokesperson declined to comment.

In a late evening exchange filing on Thursday, Yes Bank confirmed that it has sold around 231 million shares to Societe Generale (18.75% of 231 million), Key Square Master Fund Lp (16.2%), BNP Paribas Arbitrage (14.43%), HDFC Balanced Advantage Fund (10.26%) and Key Square Master Fund II Lp (5.88%), among other shares.

Other investors in the QIP were Government Pension Fund of Norway, British investment firm Ashmore Group and Aditya Birla Sun Life Asset Management Co. Ltd, among others, said the first person.

Yes Bank’s successful QIP in a weak equity market propelled the bank’s stock by 6% on Wednesday, before it closed at ₹76.55 on BSE, but raising more capital will be crucial for the bank if it intends to comply with capital adequacy regulations.

As of the June quarter, the bank’s tier I capital adequacy ratio stood at 10.7% as against the regulatory requirement of 8.875%. The bank’s common equity tier 1 capital stood at 8%, which is marginally above the regulatory requirement of 7.375%.

“The latest QIP will increase the bank’s CET-1 ratio to 8.6%," added the second person.

Raising more capital will be crucial for Yes Bank to achieve regulatory balance between capital adequacy rules and business growth.

However, since the Yes Bank stock has witnessed an 80% drop in its price from ₹404 a year ago, larger the capital issuance, higher will be the dilution in stake.

“With a higher dilution of stake, new investors will tend to have a significant holding in the bank. This is why Yes Bank will try to on-board a long-term strategic player in the next capital raising issue. At the current market price, $600 million of capital raising may lead to a stake dilution of over 20%. Depending on the stock price the bank will decide the size of the issuance," said the second person.

On Wednesday, Yes Bank raised ₹1,930 crore through the QIP offering. The share issuance resulted in a 9.96% stake dilution.

The bank originally planned to raise $1 billion to shore up its capital adequacy ratio required under Basel III norms.

Yes Bank is dealing with a surge in doubtful loans, falling share price and a declining profit. The bank’s net profit in the April-June quarter fell to ₹114 crore from ₹1,109 crore in the year-ago period.