Mumbai: Private lender Yes Bank Ltd’s board, on Friday, proposed to increase the bank’s authorized share capital from ₹800 crore to ₹1,100 crore to be able to raise enough growth capital.
Following a seven-hour long board meeting, the bank said in an exchange filing that since the bank has already utilized the capital raising limit available under the previously approved resolution by the shareholders in its meeting held in June, 2019, it was necessary to increase the bank’s authorized capital to be able to raise more money.
The bank will need approvals from the Reserve Bank of India and shareholders to increase the authorized capital.
Yes Bank, which raised around $270 million through a qualified institutional placement (QIP) recently, is attempting to raise more money, primarily in order to improve its capital adequacy ratio.
The bank sold around 231 million shares to Societe Generale (18.75%), Key Square Master Fund Lp (16.2%), BNP Paribas Arbitrage (14.43%), HDFC Balanced Advantage Fund (10.26%) and Key Square Master Fund II Lp (5.88%) in the QIP.
However, as of the June quarter, the bank’s tier I capital adequacy ratio stood at 10.7% as against the regulatory requirement of 8.875%. The bank’s common equity tier 1 capital stood at 8%, which is marginally above the regulatory requirement of 7.375%.
The QIP increased the bank’s CET-1 ratio marginally to 8.6%.
Raising more capital will be crucial for Yes Bank to achieve regulatory balance between capital adequacy rules and business growth.
Following the Friday meeting, the bank’s board authorized its capital raising committee to raise capital and said the committee will decide the method and quantum of fund raising including preferential allotment route, subject to shareholders' approval.
The bank also authorized its managing director and CEO Ravneet Gill to negotiate term sheets with prospective private investors.
On 16 August, Mint reported that Yes Bank was planning to raise an additional $600 million from large investors to bolster its capital buffers.
Yes Bank is dealing with a surge in doubtful loans, falling share price and a declining profit. The bank’s net profit in the April-June quarter fell to Rs.114 crore from Rs.1,109 crore in the year-ago period.
Also read: Fresh capital is likely to bring a short-lived breather for Yes Bank