Yes Bank’s founder Rana Kapoor adds a twist to fundraising tale
2 min read.Updated: 11 Sep 2019, 12:01 AM ISTAparna Iyer
Yes Bank courts a global tech firm for a minority stake sale to raise more capital for growth
Co-founder Rana Kapoor is reportedly in talks with Paytm to sell stake simultaneously
That Yes Bank Ltd desperately needs capital for growth is a well-known fact. The bank’s chief Ravneet Gill has used every public forum to drum up the lender’s intention to raise money and seek investors.
The bank did raise about ₹1,900 crore through a qualified institutional placement (QIP) of shares just a month back, but the amount was far from what was required to maintain its regulatory minimum capital, as well as to grow at a decent rate.
As if matters weren’t complicated enough, Yes Bank may now need to compete with another seller of its shares. The bank’s co-founder Rana Kapoor, who was ousted as its chief executive last year, is willing to sell his stake, according to media reports.
Kapoor holds 9.64% in Yes Bank, together with his family members. According to reports, he is willing to sell the stake to One97 Communications Ltd that runs digital wallet Paytm. The stake, which he once referred to as diamonds that would be never sold, is reportedly being valued at ₹2,000 crore.
The moot question is whether Kapoor’s plan to dispose of his diamonds will throw a spanner in the works of the Yes Bank management. After all, there is only so much appetite for the lender’s shares at the moment and a supply of paper worth ₹2,000 crore could further reduce demand for the bank’s primary issue of shares. Not too long ago, while Yes Bank set out to raise $1 billion from its QIP issue, all it managed to gather was a little more than $250 million.
Besides, if Yes Bank has been courting a large strategic investor, it may well start having second thoughts if another large shareholder such as Paytm is expected to come on board.
On the flip side, Kapoor’s exit may alter the perception of investors towards the beleaguered bank favourably, as the overhang of the promoters would cease to exist, and Yes Bank will be viewed as a professionally-run lender.
In any case, Gill rushed to calm investors’ nerves by telling reporters that the bank is close to signing an investment deal with a global technology company. “It is close to being a done deal," he told Reuters, adding that the stake sale was likely to be less than 10% to start with, but could increase later. Later, the bank in a notice to bourses said that talks of a deal are speculative, although the lender continues to explore various means of raising capital.
Firms typically refrain from talking about deals that are in the works, and there could be more to Gill’s forthrightness than meets the eye.
Be that as it may, another hurdle is getting the central bank’s approval for inducting these large investors. Whether the regulator will make allowances to its strict bank ownership rules with a view to steady the Yes Bank ship is anybody’s guess.