YES Bank picks IDFC Securities, Cantor Fitzgerald, Ambit to raise $2 bn

Cantor Fitzgerald is led by Anshu Jain, the former co-CEO of Deutsche Bank AG.

Yes Bank has picked Cantor Fitzgerald, IDFC Securities and Ambit to help the lender raise as much as $2 billion for bolstering capital buffers, people with knowledge of the matter said.

The bank, staggering under the weight of soured loans, has been plagued by worries about its asset quality and uncertainty about efforts to raise new capital. It’s trying to shore up a core equity capital ratio that’s barely above a regulatory minimum of 8 per cent.

The lender’s shares surged the most since November 27 on Wednesday as investors were encouraged by the move to pick bankers, while its 2023 dollar bond gained the most since January 15. Yes Bank, led by Chief Executive Officer Ravneet Gill, has lost more than 80 per cent of its market value in the past year on concerns about its ability to raise funds.

“As credibility and sentiment get eroded, time is running out for the bank to raise capital,” according to Bloomberg Intelligence analyst Diksha Gera.

“With the bankers for fund raising in place Yes Bank needs to move quickly to avoid panic among credit investors, which could cause unwanted liquidity pressure.” Cantor Fitzgerald is led by Anshu Jain, the former co-chief executive officer of Deutsche Bank AG until 2015, while Gill headed the German bank’s Indian operations before he joined Yes Bank last year. The Economic Times reported the appointment of the banks earlier.

A spokesman for Yes Bank and spokeswoman for Ambit declined to comment about the fund raising plans. A representative for IDFC Securities and spokeswoman for Cantor didn’t immediately respond to emails seeking comment.

Market News

YES Bank share sale: Erwin Singh Braich, family offices may not be included

Bank plans to raise $1.75 billion; in talks with five European institutions: Ravneet Gill.

Market News : YES Bank is likely to skip issuing shares to family offices in favour of institutional investors in the current round of its preferential issue, where the bank plans to raise $1.75 billion, its managing director and chief executive officer, Ravneet Gill, has said.

This means Erwin Singh Braich, GMR Group, and Aditya Birla Family Office, which had all put in bids, may not get a piece in the bank's stake sale.

Denying reports of a forced merger being thrust upon the bank, he said he was confident of raising the target funds soon.

“Large European financial institutions regulated by the Financial Conduct Authority have shown an interest in the bank,” Gill told Business Standard in an interview. "Since the talks are at an advanced stage, the bank will reveal the names of these investors once it enters into a binding agreement with them," he added.

It is understood that YES Bank has received an interest from four to five financial institutions, and one of them could take as much as 10 per cent in the bank. Others are expected to pick up a 4-5 per cent stake each.

Gill said that since these investors are well-governed and established names, they should pass the ‘fit and proper’ test of the Reserve Bank of India.

"When these bids become binding and once we disclose the names, then nobody would have any concerns with regard to the quality of investors or their ability to put in the money. So, it will effectively put a lid on the issue once and for all," Gill said.

Braich had bid for $1.2 billion in the proposed $2-billion stake sale, while the Citax group evinced interest to the tune of $500 million.

Other family offices were to put in about $100 million, according to a YES Bank release.

Gill said, “As far as Indian investors and family offices are concerned, we have told them that for this capital raise, we have to go for the institutional route.”

He also feels that the $500 million committed by London-based Citax Holdings and Citax Investment Group should also pass the regulatory muster. “We will not trip on regulatory issues,” he said.

A bank's race against crisis has served a warning to Indian banking

At more than $200 billion, India's world-beating pile of bad loans is bigger than Italy's.

Business Standard : India’s fragile financial system is swinging between despair and hope. Two separate incidents — both featuring the lender YES Bank Ltd — recently underscored the drag of past underwriting follies as well as the lift from a digital reset. It will take time, but good things will come to Indian banking as a result of the present crisis.

Start with the sudden default by financier Altico Capital India Ltd. on a 199.7-million-rupee ($2.8-million) interest payment to Abu Dhabi-based Mashreqbank PSC. Clearwater Capital Partners-backed Altico, which borrows money from banks and mutual funds to make loans to property developers, called the situation a “liquidity crisis.” And that made YES Bank investors gloomy.

Based on January data, the midsize Indian bank had a 4.5-billion-rupee exposure to Altico, the third-highest after Mashreq and HDFC Bank Ltd.

While HDFC Bank, the country’s most valuable lender, has the capital — and current profit — to take the occasional credit hit, YES’s capital cushion is already frayed by dodgy loans to beleaguered shadow banks and troubled tycoons. Both these borrower groups have found it hard to refinance debt since the collapse last year of IL&FS Group, a large Indian infrastructure financier and operator. Altico’s unraveling shows that an end to credit woes is not yet in sight.

At more than $200 billion, India’s world-beating pile of bad loans is bigger than Italy’s. State-run Indian banks are carrying the bulk of the burden, but at least they’re getting dollops of taxpayers’ money and being merged into fewer banking groups. A private-sector lender like YES doesn’t have a formal public backstop. If it can’t fend for itself, the central bank could step in and force an arranged match with a better-run bank. The terms won’t be favorable to Yes shareholders.

To avoid such a fate, YES needs to raise growth capital by convincing new investors that the worst is over. And that brings us to the week’s other big incident. YES shares jumped 13.5 per cent after reports that One97 Communications Ltd., which owns the Indian digital payments network Paytm, may buy out a 9.6 per cent stake in Yes from Rana Kapoor, the lender’s co-founder.

Kapoor was forced to step down as CEO early this year by the Reserve Bank of India amid a controversy over bad-debt accounting.