HDFC and ICICI Bank will infuse ₹1,000 crore each while Axis Bank will invest ₹600 crore and Kotak Mahindra Bank announced investment of ₹500 crore
The quantum of investment to be made by LIC is yet to be approved by the board, according to a source
Mumbai: State bank of India has submitted a proposal to the Cabinet under which the state owned lender along with Life Insurance Corporation and 4 private sector lenders will infuse ₹11,000 crore into the cash strapped Yes bank Ltd.
According to the proposal, SBI will infuse ₹7250 crore in Yes bank, HDFC Ltd and ICICI bank Ltd will infuse ₹1000 crore each, Axis Bank will infuse ₹600 crore and Kotak Mahindra Bank Ltd is expected to infuse ₹500 once the plan is approved by the cabinet in Friday’s meeting. The quantum of investment to be made by Life Insurance Corporation is yet to be approved by the board, according to a source. Under the new proposed shareholding structure, SBI may hold 45.74%, HDFC and ICICI Bank may hold 6.31% each, and Axis Bank and KMB may hold around 3.5% each. The additional tier 1 bondholders may hold 10.73% and existing shareholders may hold 14.79%. Despite the infusion, Yes bank will continue to hold private sector tag, according to two other sources aware of the matter.
The boards of HDFC, ICICI Bank and Axis Bank have approved the investment to be made to into the bank. According to stock exchange notifications, both HDFC and ICICI bank said that they will acquire 100 crore equity shares in Yes Bank at ₹10 per share, raising the shareholding to an excess of 5% shareholding in the private sector lender. Axis bank said that it will acquire 60 crore shares at ₹10 per share, raising the shareholding to nearly 5%.
According to the “Yes bank Ltd Reconstruction Scheme 2020, which was submitted to the cabinet, 75% holding of the new investors will subject to a lock in for 3 years. The main investor SBI, which now proposes to hold 45.74% in Yes Bank, cannot lower its shareholding below 26% in the private lender over the next 3 years. The voting rights of all investors except SBI will be capped at 9.9% each.
The AT 1 bond holders to whom Yes bank owed ₹8800 crore, will have to take a nearly 80% haircut as they will be now getting 10.73% stake or 170 crore shares in the bank. This too will be locked in for 3 years from the date of allotment of the shares.
According to the proposed scheme, Prashant Kumar will be Yes bank’s new managing director and chief executive officer for 3 years. Chairman and 2 directors will be appointed by RBI. Mahesh Krishnamurthy and Atul Bheda will be the bank’s independent directors as per the proposal.
On 5 March, Mint was the first to report that private banks including ICICI bank, HDFC, Axis bank and Kota Mahindra Bank will be part of the SBI consortium to invest in the troubled Yes Bank. The report also mentioned that LIC could put in some capital into the private sector lender.
RBI imposed a moratorium on Yes Bank late evening on 5 March, following it up with a draft reconstruction scheme the next day, asking depositors and creditors to share their views by 9 March.
At the heart of Yes Bank’s troubles is its capital inadequacy and the inability to raise enough funds to boost its Common Equity Tier 1 (CET1) capital. Yes Bank’s CET 1 is at ₹27,600 crore, according to an estimate by JPMorgan in a 5 March report. As on 30 September, its capital adequacy ratio was 16.3%, Tier I ratio 11.5% and CET 1 ratio at 8.7% (against the required 7.375%).
“With the current equity infusion, Yes bank will still be short of capital. The earlier plan was to do the second round of fund raising post the March results. With the market turmoil, it looks like the fund raising plan may have to be pushed, “ according to banker aware of the matter.
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