Home / Industry / Banking /  Investors seek clarity on Yes Bank’s rescue plan

MUMBAI : State Bank of India (SBI), which has agreed to pick up a 49% stake in Yes Bank, is in talks with marquee investors such as Goldman Sachs, Brookfield, Blackstone, and Housing Development Finance Co. (HDFC) but the investors are seeking more clarity on the final draft reconstruction scheme before taking a call on investing in the private lender.

Investors want to know the fate of additional tier 1 (AT1) bonds after it was proposed to be written down permanently under the draft reconstruction scheme of the bank, according to one of the investors Mint spoke to. Yes Bank has close to 8,800 crore worth of AT1 bonds, which were subscribed mostly by fund houses.

Investors also want to know who will provide liquidity support once the moratorium is lifted on 3 April and what will happen to the existing shareholders. They are also seeking clarity on those who will be appointed as the chairman and directors on the board of the bank.

“We also need to see what happens to existing shareholders. We are not worried about the quality of the book as the bank has 8,000 crore worth of provisions and 22,000 crore of capital. Investment cannot happen in a day or two. The bank cannot be shut down nor can it be merged. It has to be run with global and domestic support," said the investor mentioned above.

SBI chairman Rajnish Kumar said on Saturday that they had received interest from 23 potential investors. Those planning to invest more than 5% in the bank will come under the ‘fit and proper’ criteria formulated by RBI, he said. Depending upon the interest from other investors, SBI’s final investment amount would be determined, Kumar said.

Yes Bank will be managed and run as an independent and private sector bank by a professional board with no interference by SBI in its day-to-day affairs, Kumar said.

Under RBI’s Yes Bank Ltd Reconstruction Scheme 2020, SBI will take up to 49% stake at 10 per share. SBI has so far committed to invest up to 10,000 crore in Yes Bank for a 49% stake starting with an initial investment of 2,450 crore.

“SBI is not able to give comfort to investors on what they will be able to ensure asset-liability mismatch.To make up for the asset-liability mismatch, they might have to buy a bulk of the book to create liquidity for the bank. Corporate clients will not accept bank guarantees and LCs (Letter of credit ) of Yes Bank. Until the market accepts bank guarantees and LCs, the investors would not want to come in. Hence, SBI has to give comfort on the assets side," said Mahesh Singhi, founder and managing director, Singhi Advisors Pvt. Ltd.

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