Private sector lender Yes Bank on Monday said funds raised from its follow-on public offer (FPO) will take care of its growth requirement for the next two years. Speaking at the press conference held to announce the FPO, Prashant Kumar, managing director and chief executive officer (MD&CEO), said part of the Rs15,000 crore to be raised through the FPO will be used as buffer provisioning. He assured that the provisioning against the impact of covid-19 will not be more than 100 basis points from the current capital raised.
Kumar said the bank is looking at a loan book mix of 60% retail and small and medium enterprises (SMEs) and 40% corporate. The lender is aiming at a return on assets of 1% over the next 1-3 years and 1.5% over 3-5 years.
Kumar also said that the bank was looking at hiving off its bad loans into a separate subsidiary.
“We are exploring the option of hiving off the bank’s bad assets into a separate organization, which will be professionally run, where there will be investors. This is subject to regulatory approvals," he said.
The FPO of the bank will open on 15 July and close on 17 July. The floor price of the FPO has been fixed at Rs12-13 per share, 50% lower than the market price. Following the FPO, the bank’s capital adequacy ratio will increase to 13% from 6.3% at present.
State Bank of India (SBI), the largest investor in Yes Bank, will invest up to Rs1,760 crore in the upcoming FPO. Kumar said SBI’s additional investment will ensure that its stake does not fall below 26% post the FPO. Currently, SBI holds 48.2% stake in the private sector lender.
Yes Bank is also looking at other ways to increase liquidity, such as selling a big chunk of its wholesale loan book to SBI. On 7 July, Mint had reported that the bank has already raised Rs3,200 crore by downselling (selling loan exposure to another investor) its profitable loan facility in ‘Safeway Concessions’, a subsidiary of Australia’s Macquarie group, which operates several highway assets in India. Sold to SBI, it is now looking to raise another Rs700 crore by downselling its exposure in Warora Kurnool Transmission Ltd (WKLT) to SBI.