Yes Bank may sell a part of wholesale loan book to SBI

Troubled private sector lender Yes Bank Ltd may sell a big chunk of its wholesale loan book to its lead investor, State Bank of India (SBI) to shore up liquidity, three people aware of the talks between the two lenders said.

Yes Bank has already raised ₹3,200 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 ₹700 crore by downselling its exposure in Warora Kurnool Transmission Ltd (WKLT) to SBI, the people cited above said requesting anonymity.

In August 2018, Yes Bank had underwritten Safeway’s entire debt portion of ₹5,000 crore, helping Macquarie achieve financial closure for the project, and pay ₹9,681.5 crore upfront to National Highways Authority of India. Later, ICICI Bank took over a portion of the debt worth ₹2000 crore from Yes Bank.

With the sale of these two accounts to SBI, Yes Bank will be able to reduce its wholesale loan book, which makes up 55.9% of its overall loan book of ₹1.7 trillion. “Yes Bank is looking to reduce its loan book by selling some of these exposures. However, it is not looking at many transactions,” the first of the two people cited above said.

Emails sent to SBI and Yes Bank remained unanswered.

For SBI, refinancing these loan exposures helps increase loan book growth, which has been hit due to the impact of covid-19. “The state-owned bank is eyeing high-rated customers to refinance a portion of its debt. Toll Operate Transfer (TOT) is an AA-rated account and that gives some confidence to SBI to take over these loans,” the second person said.

In an interview to Hindu BusinessLine on 3 July, SBI MD Arijit Basu said the bank expects a flat growth in its corporate loan book this fiscal. The bank had reported a 2% growth in corporate loans infiscal year 2020, slowing from a 14% increase in fiscal year 2019. SBI expects a pick up in credit demand only by the third quarter, according to the report.

The transaction between Yes Bank and SBI comes at a time when the private sector bankis preparing for a ₹15,000 crore follow-on public offer (FPO) in the second week of July.

The equity capital will help Yes Bank increase its capital adequacy ratio which currently stands at 8.5%.

The fundraise is part of the Reserve Bank supervised rescue scheme under which SBI picked up 48.2% stake in the private lender, making it an associate bank.