YES Bank eyes another round of Capital Raising post a successful Rs. 1,930 crores QIP issuance

Yes Bank has recently completed a Qualified Institutional Placement (QIP) issue of 2.31 crore equity shares, raising Rs. 1,930 crores. This issuance diluted the bank’s equity by around 10%, but provides the much-required support for the future business growth. The bank’s Core Equity Tier-1 (CET) was close to the regulatory limit of 7.375% at 8% as at 30th June 2019 and this QIP issuance provides a cushion to the bank’s capital buffers. The Total Capital Adequacy Ratio is poised to increase to 16.2%, Tier I Ratio to 11.3% and Core Equity Tier I Ratio to 8.6% after considering the financial position as on 30th June 2019 adjusted for this QIP issuance. This helps the bank to stay capitalized well above the regulatory limits.

Sharing his view on the bank’s QIP issue, the Bank’s MD & CEO Mr. Ravneet Gill said, “We have received an encouraging response from marquee global and domestic investors. 10% dilution was what had been approved by the shareholders, and we fully utilized this approval. We see this as a strong endorsement by the investor community of the inherent strengths of the YES BANK franchise and its future growth prospects.

The QIP issue was oversubscribed by almost three times and saw the allotment of equity shares of the Bank to marquee investors. The list of major investors include Societe Generale (18.75%), Key Square Master Fund LP (16.18% in Fund I and 5.88% in Fund II), BNP Paribas Arbitrage (14.43%), HDFC Balanced Advantage Fund (10.26%). In an interview with a leading business news channel, Mr. Gill further shared, “The fundraising has been done keeping bank’s future growth in mind. While some market participants have spread false news that the capital will be used to provide for bad loans instead, we would like to assure all the stakeholders that our operating profits are sufficient enough to absorb our credit costs. We would also like to stand by our existing credit cost guidance of 125 bps for the entire year.

With optimistic future growth plans, Yes Bank will require further fund infusion, and if the news reports are to be believed, Yes Bank plans to raise an additional US$ 600 million, post this US$ 270 million QIP issuance. However, the bank would need a fresh shareholder approval to go ahead with these plans, and the markets are expecting that the bank will reach out to the shareholders over the next few weeks. The current issuance diluted the bank’s equity by around 10%, and given the size of the proposed offering, around 20% stake might be at stake depending on the prevailing stock price. As such, it is expected that the bank may also reach out to Strategic investors to support the bank’s ambitious growth plans.

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