Mumbai: Yes Bank Ltd’s proactive disclosure of potential investors attracted scrutiny on Monday, with analysts questioning the quality of suitors who have promised a total of $2 billion.
The troubled private lender on Friday listed the likely investors, including a group of offshore family offices offering $1.7 billion and six other investors offering a total of $300 million.
Analysts at financial services firm Macquarie led by Suresh Ganapathy wrote in a note on Monday that for nearly 85% of the proposed commitments, quality is a big concern. Ganapathy is the head of financial services research at Macquarie. Yes Bank shares fell as much as 7.61% on BSE on Monday before closing at ₹64.05, down 6.22% from their previous close. The benchmark Sensex index closed almost unchanged.
The largest investor listed by Yes Bank is Erwin Singh Braich/SPGP Holdings offering $1.2 billion, followed by $500 million from Citax Holdings & Citax Investment Group.
“To be honest, we hadn’t even heard of SPGP Holdings/Erwin Singh Braich and Citax Investments. These companies don’t even have an official website, nor does the billionaire Erwin Singh Braich have a Wikipedia link to describe him," said Macquarie. The brokerage said it doubts Reserve Bank of India “would approve such investors who don’t pass muster" with the central bank’s “fit and proper" criteria.
Macquarie also expressed serious reservations regarding the quality of Yes Bank directors willing to consider such investors as large shareholders.
While there is not much information available in the public domain regarding Braich’s investments, he is referred to as Canada’s first Sikh billionaire. Braich, 63, is the founder of The Braich Group of Companies and Trusts that underwent bankruptcy proceedings in 1999.
According to the site erwinsinghbraich.com, Braich took over the family business at the age of 20 when his father passed away on his 65th birthday on 21 May 1976. After a few years, he turned to business activities worldwide, focusing mainly on Eastern Europe.
“A protracted divorce, family maintenance payments, and child custody battle had already begun, as well," said the website, adding bankruptcy proceedings against him began coincidentally just days after he was named the Indian Businessman of the Year on 15 May 1999.
Jefferies analysts Nilanjan Karfa and Harshit Toshniwal said in a report on Monday that at current dilution, both family offices will attract the RBI’s ‘fit and proper’ criteria as they will own more than 5% in a private sector bank. “And that’s being seen as a big hurdle," they said.
Alongside Braich is Hong Kong-based SPGP Holdings, that had bid for bankrupt Indian garments company Reid & Taylor earlier this year but was unable to make the earnest money deposit of ₹2 crore. Documents sourced from Hong Kong’s companies registry showed that SPGP Holdings has a total paid-up capital of Hong Kong dollars (HKD) 10,000, or ₹91,470, and has one director—Somitra Agrawal, a resident of Malad (west), Mumbai. According to spgrowthpartners.com, Silver Dale Services (India) Pvt. Ltd is SPGP’s business associate and has total assets of ₹1.7 crore as on 31 March 2019. Silver Dale Services made a profit of ₹17.93 lakh on the back of ₹1.97 crore in revenue in FY19. Interestingly, Agrawal was a director of Silver Dale when it was incorporated in 2005.
According to a Nomura report, Agrawal, also the CEO of SPGP, clarified it is a joint proposal with Braich and the required funds are already earmarked and will be transferred to an escrow in Canada or Hong Kong. The report also cited Agrawal as saying that globally, SPGP has $15 billion in assets under management, with interests in Canada/North America and Asia.
The other family office interested in Yes Bank is Citax Holdings & Citax Investment Group. According to public documents on Companies House, UK’s registrar of companies, Citax had total assets of £20,107 or ₹18.64 lakh as on 30 June 2018.
Through a preferential allotment of shares, Braich and SPGP will hold 25% in Yes Bank if he invests the said amount, according to Nomura. Citax will get a 10% stake. Current rules on shareholding do not allow a single investor to own more than 10% in a private bank.
Meanwhile, Nomura also said the management of Citax Holdings has clarified it has assets under management of $1.3 billion currently and recently raised $3 billion, of which a large part is committed to a refinery in North Africa and that it intends to invest a third of the proceeds in India.