es Bank co-promoter Rana Kapoor, and his family-run firms Yes Capital (India) Pvt. Ltd and Morgan Credits Pvt. Ltd, have exited the bank, thus losing all control and voting rights.
Their decision to bring their stakes in Yes Bank down to zero came amid a spate of investor exits over the past three months.
After selling almost the entire promoter group stakes of the two family-run firms in September, Kapoor was left with 3.92%, Yes Capital with 0.8% and Morgan Capital with nil in Yes Bank.
Kapoor, in his personal capacity, had sold a part of his direct stake between last August and October in the form of non-convertible debentures, primarily to repay debts taken by the promoter group firms.
On Thursday, Yes Bank said in a stock exchange filing that Kapoor and Yes Capital were left with no more stakes at the end of December. Consequently, the public holding in Yes Bank has gone up from 86.95% at the end of September to 91.67%.
However, due to constant pressure on the bank’s stock and uncertainty over its fund-raising plans, several marquee investors dumped Yes Bank shares in the December quarter, according to stock exchange data.
Kotak Mutual Fund, SBI Mutual Fund and Franklin Templeton Mutual Fund, which held 1.14%, 1.7% and 1.14%, respectively, at the end of September, sold their entire stakes in the December quarter. WF Asian Smaller Companies Fund Ltd also exited its 1.63% stake.
At least 265 foreign portfolio investors have exited Yes Bank in the last quarter, leaving the lender with only 238 FPIs. Government Pension Fund Global (of Norway) trimmed its stake from 1.75% to 1.3% in the bank in the December quarter. HDFC Mutual Fund cut its stake from 2.37% to 2.27% in the three months to December, besides at least three insurance companies and four banks exited Yes Bank during this period.
The bank’s other promoter, Madhu Kapur and her firm—Mags Finvest Pvt. Ltd—continue to hold 6.87% and 1.46%, respectively, with the overall promoter holding now standing at 8.33%.
As of the September quarter, Yes Bank’s tier I capital adequacy ratio stood at 10.7% against the regulatory requirement of 8.875%. Its common equity tier 1 capital stood at 8.6%, just above the regulatory requirement of 7.375%.
Ironically, Kapoor’s control has been diminishing ever since September 2018, when he said Yes Bank shares were “diamonds" to him, vowing never to sell them, soon after Yes Bank co-promoter Madhu Kapur sold a part of her holding.
“Kapoor’s exit was inevitable. The market gauged that this promoter group will eventually lose control. That should not impact the bank’s core functioning much, but the exodus of large domestic and foreign institutional investors has dented confidence among investors, which is reflected by the stock trend. All this will only make it even tougher for the bank to find an investor. If the bank is unable to raise enough core capital soon, RBI may ask another bank to let Yes Bank merge with it so that depositors and borrowers are not affected," said a banking industry expert of a large US-based multinational research firm.