Deals Buzz: Yes woos Microsoft for a strategic investment6 min read . Updated: 07 Oct 2019, 09:58 AM IST
In other news, Centrum Alternative Investment Managers Ltd, the alternative investment arm of Centrum Group, has achieved the first close of its maiden structured credit fund at ₹155 crore
Mumbai: Mint brings you your dose of the top deals news, reported from newsrooms across the country.
Yes woos Microsoft for a strategic investment
Private lender Yes Bank is in talks with three top technology companies, including Microsoft Corp., to induct one of them as a strategic shareholder as part of the bank’s strategy to get fresh capital infusion and augment its digital ambitions, Mint reported citing two people directly aware of the discussions. If the talks, which began three weeks ago, are productive, Yes Bank could sell as much as 15% through a fresh equity issuance. The stake sale may fetch the bank around ₹2,000 crore but, more importantly, such a deal may help the bank work on its digital banking and payment system plans. Yes Bank has appointed investment bankers as well to shortlist the global tech firm. The strategic partner may be allotted a board seat in the bank and RBI is aware of the bank’s plans. Yes Bank is in firefighting mode after witnessing steep erosion in its market value since last year. The lender’s stock has nosedived from ₹404 in August last year to ₹42.15 now. Inducting a global tech firm such as Microsoft as a strategic partner may not be simple for Yes Bank as it will require regulatory approvals. A stake purchase of more than 5% in a bank requires the central bank’s approval. Since talks between Yes Bank and Microsoft entail a potential stake sale of up to 15%, RBI approval will be mandatory.
Centrum’s structured credit fund eyes ₹500 crore corpus
Centrum Alternative Investment Managers Ltd, the alternative investment arm of Centrum Group, has achieved the first close of its maiden structured credit fund at ₹155 crore, Mint reported citing Rakshat Kapoor, fund manager and chief investment officer of Centrum Credit Opportunities Fund (CCOF). The fund is targeting to raise a total of ₹500 crore, along with a greenshoe option to raise another ₹250 crore. A greenshoe option gives the fund an option to raise more than it had originally planned, if it receives higher subscription interest. With its credit fund, Centrum is looking to tap the opportunity created by the liquidity crisis in non-bank lending, which has led to a slowdown in loan disbursements. The fund has received most of its investments from large family offices and a network of ultra HNIs (high-net-worth individuals). While Centrum Group has committed to invest 5% of the total fund size, CCOF will raise the rest from others. Centrum’s credit fund will provide debt to mid-sized firms in high growth, brick and mortar, consumption-led and core sectors of the economy.
Shareholders of UTI AMC to pare stake via IPO
Shareholders of India’s oldest mutual fund house, UTI Asset Management Company (AMC), have decided to sell part of their holdings to the public through a share sale. An initial public offering (IPO) is expected in the next six months as talks with investment bankers are in the final phase, The Economic Times reported citing people aware of the development. The move comes after the Securities and Exchange Board of India (Sebi) directed the fund house to comply with crossholding rules. UTI AMC, promoted by four domestic shareholders including Life Insurance Corporation of India (LIC), is expected to get valued at ₹12,000-13,000 crore. The IPO size will be in the range of ₹2,500-3,000 crore. In March 2018, Sebi had introduced crossholding limits in mutual funds to eliminate potential conflicts of interest. It mandated that if a shareholder has at least a 10% interest in a mutual fund, it cannot hold a similar-sized stake in another fund house and would also have to give up its board positions. UTI’s four domestic shareholders — LIC, State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) — hold 18.5% stake each and also have their own AMCs. Hence the crossholding rule applies to all the four. US asset manager T Rowe Price holds the remaining 26% stake. If UTI’s IPO materialises, then it will be the third AMC to be listed on the bourses behind Reliance Nippon Life AMC and HDFC AMC.
PE firms eye Yes Bank stake
Global private equity firms — TPG, The Carlyle Group and Farallon Capital — are seeking to buy large strategic stakes in Yes Bank, the private sector lender where all pledged shares have now been sold and business fundamentals present a compelling value proposition at current market price, The Economic Times reported citing a banker with direct knowledge of the negotiations. The talks have advanced substantially in the past few days and they could result in one or more private equity firms taking a significant stake in the bank, providing the growth capital the lender needs to compete at the top-tier of Indian banking. At current market price of ₹42.15 on the National Stock Exchange (NSE), Yes Bank is the least expensive among the top-tier private sector lenders on the parameter of book Value. It is trading at a price-to-book ratio of 0.4, compared with 4.22 for HDFC Bank, 5.16 for Kotak Mahindra Bank and 2.27 for ICICI Bank. Yes Bank has had to encounter deterioration in asset quality in the June quarter as well. Gross NPAs increased to ₹12,092.10 crore, or 5.01% of loans, as on June 30, compared with 1.31% a year ago. So, first-quarter net profit dropped 91% to ₹114 crore from ₹1,260 crore a year ago, with provisions for bad loans increasing three-fold to ₹1,784 crore in the June quarter. The decline of more than 80% in the stock’s value in FY20 might mean equity dilution of 30% to 35%, Gill had said last week. He also requested the central bank to relax the 5% per shareholder limit holding in light of the large dilution expected by the bank.
Sachin Bansal, Poonawalas back lending firm U Gro
Flipkart co-founder Sachin Bansal and the Poonawala family will invest about ₹100 crore in the technology-enabled small business -lending platform U Gro Capital through two separate securitisation and bond deals, The Economic Times reported. The two transactions affirm the trend of technology-enabled financial services firms drawing long-term capital despite a crisis of confidence in the broader NBFC space, where funds flow from mutual funds has dried up over the past one year. U Gro, set up by former Religare Finance chief executive Shachindra Nath, will use the funds to expand its businesses at a time when capital is scarce for the sector. U Gro, which last year raised capital from PAG Asia, ADV Partners, Citigroup, Well Fargo, New Quest and Samina Capital, started its disbursals in January this year, and has disbursed more than ₹600 crore in debt to businesses across India. The BSE-listed U Gro has done the first securitisation transaction with Poonawalla Finance, part of the Poonawalla family, which also owns India’s largest vaccine maker Serum Institute of India. The Poonawalla family is also independently pursuing NBFC operations, and is seeking buyouts in the space. Separately, Sachin Bansal entered into a non-convertible debenture deal with U Gro. Bansal, after selling Flipkart to Walmart in a record deal last year, has invested ₹740 crore to acquire Bengaluru-based non-bank lender Chaitanya Rural Intermediation Development Services Pvt. Ltd (CRIDS). He has also invested in a few other NBFCs, including Altico Capital.