HYDERABAD: Private lender Yes Bank has gone back to the drawing board. Markets were expecting a closure on the anticipated investment line-up, but the bank said its board meeting remained inconclusive and borrowed time to consider all the proposals it received thus far.
While the USD 500 million offer from Citax Holdings and Citax Investment Group is being 'favourably considered,' the controversial USD 1.2 billion binding offer from Erwin Singh Braich and Hong Kong-based SPGP Holdings, however, continues to be under discussion.
Interestingly, the door is also wide open for other potential investors willing to contribute to the lender’s USD 2 billion whip round. "The board is willing to favourably consider the offer of USD 500 million of Citax Holdings and Citax Investment Group and the final decision regarding allotment to follow in the next board meeting, subject to requisite regulatory approval(s)," it said in a filing with the bourses.
Unethused by the investor line up, traders continued to hammer down the stock with the scrip tumbling as much as 10.4 per cent on the Bombay Stock Exchange (BSE) on Tuesday. It closed at Rs 50.40 per share.
Given the bank’s strong franchise, markets presumed that there will be sufficient interest from strategic players, but were disappointed by the absence of marquee investors.
On November 29, the bank disclosed the names of eight investors to pump USD 2 billion. Besides Braich, others that evinced interest include Aditya Birla Family Office, Rekha Jhunjhunwala, wife of market investor Rakesh Jhunjhunwala, who were willing to pump USD 25 million each, and GMR Group and Associates’ USD 50 million investment offer.
The largest among the lot was Braich/SPGP Holding, with USD 1.2 billion give-away, followed by Citax Holding with USD 500 million commitment. However, news about Braich’s alleged bankruptcy cases, lawsuits and failed business deals shook market sentiment, with reports indicating that the bank may reject the proposal. Concerns about the unlikely possibility of RBI’s consent also were raised as the central bank prefers lenders to keep away from investors lacking market credibility.
Stating that upfront stress recognition makes capital infusion the need of the hour, Kunal Shah of Edelweiss Securities noted that even post-capital infusion, the bank’s risk appetite is likely to remain weak and the bank may not be viewed as a growth story over the medium term.
Over the past 12 months, the bank’s gross bad loans shot up to 7.4 per cent in the second half of FY20 from 2.1 per cent in Q3, FY19 and has an elevated stress pool with over 10 per cent being in BB and below.
Given that the bank has high exposure to non-banking financial companies and real estate sectors, Shah estimates gross non-performing assets to cross 13 per cent by FY 2021.