Top executives at Carlyle in Hong Kong, along with the leadership of Advent, have had several meetings with senior management this week.
and (), the largest shareholder of the private lender, as well as the Reserve Bank of India (reserve Bank of India) to the officials to fix the plan outline, which will be done in phases.
ET was first to discuss a potential $1 billion investment with Advent and Carlyle’s Yes Bank on February 4 and March 4.
Advent and Carlyle declined to comment. Yes Bank and SBI did not respond to queries.
The proposed investment may be similar to Bain Capitalinvested in
This saw the Boston-based private equity firm lead a consortium to invest $1.8 billion.
deal dynamics
To begin with, Yes Bank is expected to issue around 2.6 billion warrants and allot fresh shares to Carlyle and Advent by way of preferential allotment.
The two PE funds are looking to invest ₹3,600-3,900 crore (at ₹14-15 per share) cumulatively and each own 5% of the extended equity base. Warrants will be converted into shares in the future based on a pre-agreed strike price and timeline, typically 18 months.
“Management believes the stock is undervalued, but the current share price or the 52-week price average is the best benchmark for investors,” one of them said.
The bank has got unofficial RBI approval
“In the last one year, from a high of ₹16.25 per share, it has seen a fall of 55% to ₹10.51 per share.”
The market capitalization of Yes Bank at ₹35,803.57 crore on the Bombay Stock Exchange closed with a gain of 5% at ₹14.29 on Thursday.
Yes Bank can issue a maximum of 3.8 billion warrants, so that SBI’s stake remains at 26%. As per the regulator-approved revival plan, SBI’s stake in the bank cannot fall below the 26% limit before March 2023. Currently, the largest state lender Yes Bank owns 30%.
If warrants are issued on a preferential basis, as per the rules, the average price of the last six months becomes the basis for the strike price for the warrant.
The transaction is expected to take place after the completion of the deal with JC Flowers and shareholder approval for the new board members, which is expected by September at the latest.
After April 2023, the bank will issue another tranche of new shares as per the offer, which is less than the first tranche, to both the investors. Under the Banking Regulation Act, an investor can acquire up to 5% stake in any bank without the approval of RBI.
However, the Yes Bank management has received unofficial approval from the regulator with regard to new investors, some of the people cited above. Once the transaction closes by the end of this financial year, two new investors will also get board seats. At Thursday’s exchange rate, since the bank is aiming to raise ₹8,000 crore ($1 billion) or even ₹10,000 crore, as envisaged earlier, each investor will take the bank’s extended 5%- 9.9% can be owned. equity. But that discussion is still on, directly connected sources said.
Even though discussions began at the beginning of the calendar year, the board’s restructuring was a harbinger for new investors to step in. This indicates that the private lender is ready for a turnaround, given the restrictions imposed earlier as part of the reconstruction process. was removed.
RBI had announced earlier last month that Yes Bank would be out of the reconstruction scheme, following which a new board would be formed. This is about eight months ahead of the revival plan’s three-year deadline. For shareholders, however, the ban on trading may not be lifted until March 2023.