Yes Bank could sell as much as 15% through a fresh equity issuance if the talks are productive
The ailing lender has said that it doesn’t mind if raising capital results in a large stake dilution
Mumbai: 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, two people directly aware of the discussions said.
If the talks, which began three weeks ago, are productive, Yes Bank could sell as much as 15% through a fresh equity issuance, the people said on condition of anonymity.
“The top management of Yes Bank has held discussions with Microsoft as part of the bank’s ongoing strategy to sell a minority stake to a global tech company. 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," said one of the two people.
“Microsoft is one of the three global tech firms Yes Bank has held talks with. 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," said the second person.
“We have nothing to share on this," said a Microsoft spokesperson, replying to Mint on this story. A Yes Bank spokesperson declined to comment.
On Thursday, media reports quoted Ravneet Gill, managing director and CEO of Yes Bank, as saying that the bank is very close to getting capital from a technology company.
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.
“Since Microsoft and the other two players Yes Bank is talking to are all credible global names with proven track record, RBI may allow a 15% stake sale in the bank subject to certain caveats. For instance, RBI may ask the tech company to reduce its stake gradually within three years to 5% or so. Yes Bank is willing to comply with that," said the second person.
A PTI report on Thursday said that Yes Bank is in an advanced stage of raising capital from investors, including global tech majors.
“The exercise will result in the new investor/s picking up stakes above the regulatory cap and the RBI will have to take a call on a “non-conventional" investor coming on board," said the PTI report of Thursday, citing Gill.
According to Mint and various other media reports, Gill said the new investor will be either a strategic partner like a tech company, or a financial investor or a deep-pocketed family office.
Gill said the bank has had “informal conversations on a no-names-basis" with RBI on the proposed infusion and he expects the central bank to take a “reasonable" decision.
“In future, banks will become technology companies with a banking licence. These (tech) companies are feeling Yes Bank is digitally savvy, ‘platformized’ better and is also available for cheap valuation now," Gill said.
Yes Bank is in desperate need of fresh capital.
The lender, which has announced plans to raise up to $1.2 billion, said on Thursday that it doesn’t mind if capital raising results in a large stake dilution.
The bank’s gross advances aggregated to ₹2.32 trillion as on 30 September (compared to ₹2.42 trillion as on 30 June) with a higher share of retail advances as compared to 30 June.