London-based Hinduja group is looking to partner with private equity firm Cerberus Capital to buy a stake in Yes Bank Ltd, two people aware of the discussions said.
The talks are at a preliminary stage and a potential deal could eventually see participation from other investors, said the people cited above said on condition of anonymity. Interestingly, Hindujas currently own a stake in another private lender IndusInd Bank. Therefore, it is to be seen whether the transaction, if talks advance, is able to muster approval from the Reserve Bank of India (RBI).
Yes Bank, Hinduja group and Cerberus Capital did not respond to emailed queries till the time of going to press.
It is no secret that Yes Bank is in dire need of capital and in January, the private lender’s board approved raising funds of up to Rs 10,000 crore in one or more tranches through a qualified institutional placement (QIP), or any other private placement of equity or debt.
Bloomberg reported on Thursday that representatives of Cerberus and the Hinduja group, run by brothers Gopichand Hinduja and Ashok Hinduja, met RBI officials earlier this month regarding a bid for Yes Bank.
Currently, Life Insurance Corp. of India (8.06%), HDFC Trustee along with its various schemes (2.27%), Jwalamukhi Investment Holdings (1.62%) and Government Pension Fund Global (1.30%) are among the largest public shareholders of Yes Bank.
On 12 February, the bank informed stock exchanges that it had received non-binding expressions of interest (EoI) from at least four “prominent investors” and the capital raising effort will lead to a delay in publishing its December quarter financial results to on or before 14 March.
“In this regard, we wish to disclose that we have received non-binding expressions of interest from several prominent investors. These include J.C. Flowers & Co. LLC; Tilden Park Capital Management LP; OHA (UK) LLP (part of Oak Hill Advisors); Silver Point Capital,” the bank had said.
Yes Bank’s non-performing assets (NPAs) have swelled in the past few quarters. The bank not only needs capital for setting aside money to cover bad loans but also to stay compliant with RBI norms. At the end of September, Yes Bank’s tier I capital adequacy ratio stood at 11.5% against the regulatory requirement of 8.875%. Its common equity tier 1 (CET 1) capital stood at 8.7%, marginally above the regulatory requirement of 7.375%.
In January, the bank had rejected a proposal by Erwin Singh Braich/pl describe/ to invest $1.2 billion. On 30 November, it had said that a number of investors evinced interest in buying Yes Bank shares worth $2 billion. The bank had also said that it was in discussions with the family office of Erwin Singh Braich/SPGP Holdings and the investors had shown an interest in investing $1.2 billion through a binding offer.
Meanwhile, Icra on Thursday downgraded Rs 52,911.7 crore of bonds and certificates of deposits programme of Yes Bank, citing continued delay in capital raising. That apart, the rating agency expects a further increase in the quantum of stressed exposures and reported non-performing exposures, given the limited resolutions and recoveries.
“Accordingly, the quantum of capital requirement is also expected to increase from earlier estimates. The bank had earlier announced a capital raise of up to $2 billion in November 2019, which was upsized from the amount ($1.2 billion) announced earlier in October 2019. However, the same has not yet materialized,” said Icra.