Yes Bank mulls $500 mn Citax lifeline, Braich remains in fray

Mumbai: Yes Bank Ltd on Tuesday said it is considering a $500 million investment offer from London-based Citax Holdings and Citax Investment Group, in what would be a vital financial lifeline for the cash-starved private lender.

A final decision on the investment, which is proposed to be made through a preferential allotment, will be taken at the bank’s next board meeting. In its statement to stock exchanges, the private lender did not give a time frame for the next board meeting.

Yes Bank had said on 29 November after a board meeting that several investors had shown interest in buying its shares worth a total $2 billion through a preferential allotment. The potential investors included the family office of Canada-based Erwin Singh Braich and Hong Kong-based SPGP Holdings (as part of the $1.2 billion binding offer) as well as the $500 million offer from Citax Holdings, through non-binding agreements.

None of the potential investments have materialized so far.

The disclosure of the potential investors’ list sparked a sell-off in Yes Bank shares. The fall came on the back of research reports by brokerages, which questioned the credibility of the potential investors.

On Tuesday, Yes Bank plunged over 10% to close at ₹50.55 apiece on the BSE. In the past two days, the bank has lost about 19% of its market value, and 26% since 29 November, when names of the potential investors were made public. Over the past year, Yes Bank has lost about 70% of its market value.

Yes Bank has been desperately seeking capital to stay compliant with the Reserve Bank of India’s (RBI) norms as well as buffer its losses against bad loans and remain afloat.

“The board is willing to favourably consider the offer of $500 million of Citax Holdings and Citax Investment Group and the final decision regarding allotment will follow in the next board meeting, subject to requisite regulatory approval(s),” Yes Bank said in a statement after a board meeting on Tuesday.

The bank added that the binding offer of $1.2 billion submitted by Braich and SPGP Holdings remained under discussion, while it continued to evaluate other potential investors to raise additional capital of up to $2 billion.

Yes Bank also said on 29 November that a top-tier US-based fund house had shown interest in investing $120 million. The bank was supposed to disclose the identity of the investor last week, but is yet to do so.

Also, Yes Bank had said several other investors including billionaire investor Rakesh Jhunjhunwala’s wife Rekha Jhunjhunwala’s family office were in talks to invest at least $25 million.

Additionally, investment offers were made by Discovery Capital ($50 million), Ward Ferry ($30 million), family offices of Aditya Birla ($25 million) and GMR Group and Associates ($50 million), it said on 29 November.

The bank’s announcement on Tuesday remained silent on the names of these potential investors.

Yes Bank has been struggling to find a suitable investor to bail it out and has therefore extended the binding term sheet till 31 December.

As of the September quarter, Yes Bank’s tier I capital adequacy ratio was at 11.5% against the regulatory requirement of 8.875%. Its common equity tier 1 capital was at 8.7%, marginally above the regulatory requirement of 7.375%.

If Yes Bank secures a buyer for equities worth $1.2 billion and the investment is cleared by RBI, that will diminish the shareholding of the bank’s original promoters Rana Kapoor and late Ashok Kapur’s wife Madhu Kapur, which in turn will make it vulnerable to a hostile takeover.

After selling almost the entire promoter group stakes of his family-run firms, Yes Capital (India) Pvt. Ltd and Morgan Credits Pvt. Ltd, Rana Kapoor had a stake of 3.92% in Yes Bank at the end of September. However, he has only partly sold his stake between August and October, primarily to repay debts taken by his promoter group firms in the form of non-convertible debentures. Madhu Kapur and her firm, Mags Finvest Pvt. Ltd, hold 6.87% and 1.46%, respectively as co-promoters.

For any stake purchase of 5% or more in a bank, RBI approval is mandatory. Bank promoters are mandated to bring down their holding to 15% over a period of time.