YES Bank rises 5% on shareholders' approval for fundraising plan

Shares of YES Bank gained 5 per cent to Rs 40.70 on the BSE on Monday in intra-day trade after the bank's shareholders cleared fund raising proposal of up to Rs 10,000 crore by issuing equity shares or convertible securities which would help enhance the private sector lender’s capital adequacy. The stock of private sector lender was trading higher for the fourth straight day.

At an extraordinary general meeting on Friday, investors authorised the lender’s plans to raise capital through issuance of equity shares or other convertible securities (Special Resolution). They also approved a resolution to increase authorised share capital from Rs 800 crore to Rs 1,100 crore, the bank informed the BSE.

Earlier this month, the bank scaled down its fundraising plan substantially to Rs 10,000 crore, from nearly to $2 billion approved by the board in November, as it continued with its struggle to get investors. It would raise the money, in one or more tranches, through Qualified Institutions Placement, Global Depository Receipts, American Depository Receipts, Foreign Currency Convertible Bonds, or any other methods on a private placement basis.

Last month, the rating agency India Ratings and Research (Ind-Ra) maintained YES Bank’s long-term issuer rating of ‘IND A’ on rating watch negative (RWN) and withdrawn its short-term issuer rating of ‘IND A1’.

The agency continues to await developments on YES Bank’s equity raising, which in the agency’s opinion is critical for providing sufficient cushion to the possible credit cost impact from the stressed asset pool on regulatory capital requirement in the short- and medium-term.

The agency has withdrawn the bank’s short-term rating since there is no outstanding against the same.

Although the liquidity position of the bank seemed adequate at end-September 2019 (liquidity coverage ratio of 114 per cent), Ind-Ra believes that in the absence of any swift capital raise, the bank’s ability to manage its asset and liability maturities could get tested further.

The bank continues to remain in discussions with various potential investors. However, Ind-Ra believes raising sizeable capital in the near term could be challenging and could require various regulatory and other approvals. The rating would be reviewed again in February 2020, the rating agency said.

At 9:41 AM, the stock was trading 0.65 per cent higher at Rs 38.95 as compared to 0.35 per cent decline in the benchmark S&P BSE Sensex. A total of 3.8 crore shares have changed hands on the NSE and BSE so far.