Yes Bank to float asset reconstruction company, invites bids from investors

Ernst & Young said that the prospective investor should have a strong financial capability and should have substantial experience in the distressed asset space.
For representational purpose. (File Photo)
For representational purpose. (File Photo)

NEW DELHI: Private lender Yes Bank is scouting for investors to set up its own asset reconstruction company (ARC) in a bid to clean up its legacy loan book. It has floated an expression of interest (EoI) for potential investors to partner with it in the venture and roped in Ernst & Young as process advisor to the bank for the project.

“The prospective partners will be the lead partner/ sponsor of the ARC, with the bank as the other significant partner/sponsor, for conducting the business of the asset reconstruction in adherence with existing RBI guidelines...,” Yes Bank said in a newspaper advertisement. 

Highlighting the eligibility criteria, the advertisement states that the prospective investor or their sponsors should have minimum assets under management of $5 billion in the immediately preceding completed financial year. Investors should also have the ability to commit funds for investment or deployment in Indian companies or Indian assets of about $0.5 billion.

Besides, the investor should meet RBI’s ‘fit and proper’ criteria and has to demonstrate global experience in dealing with distressed assets along with a track record of resolution of distressed assets. It has given investors time till August 31 to submit EoIs.However, this is the second attempt of the lender to park its bad loans in a separate entity. The initial plan was to set up an ARC with a controlling stake but the proposal was rejected by the banking regulator citing conflict of interest.

Yes Bank CEO Prashant Kumar also made it clear the lender would not participate in the newly proposed bad bank or the National Asset Reconstruction Company Ltd (NARCL) as it expects to recover more through the proposed ARC and save costs in terms of management fee, etc.According to June quarter earnings, 27.1% of the bank’s corporate loan book worth Rs 25,561 crore was non-performing.

The NPA pool of the lender, which was rescued last year after its financial health deteriorated sharply, included stressed corporate entities including the Ambani-owned Reliance Group firms, Zee Entertainment Enterprises, Essel, DHFL, Videocon, among others. Gross NPAs were at 15.6% of gross advances as on June-end, up from 17.3% a year ago. Fresh slippages stood at Rs 2,233 crore but the bank is confident that “upgrades will be more than slippage” in the coming quarters. In the last financial year, Yes Bank has made recoveries to the tune of Rs 4,933 crore from over 100 accounts, It has set a target of Rs 5,000 for FY22.

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