The effort by Yes Bank to enlist Carlyle and Advent as equity investors for roughly $1 billion has picked up steam, following the proposed sale of the lender’s stressed assets to JC Flowers Asset Reconstruction Company and the formation of a new board, according to news.
Carlyle’s top brass from Hong Kong along with Advent’s leadership have held a series of meetings this week with the senior management of Yes Bank and the State Bank of India (SBI), the largest shareholder of the private lender, as well as Reserve Bank of India (RBI) officials to fine-tune the contours of the plan, which will be undertaken in phases.
The proposed investment may be similar to Bain Capital’s $1.8 billion consortium investment in Axis Bank, by the Boston-based private equity firm.
Beginning with a preferential issuance of new shares to Carlyle and Advent, Yes Bank is expected to issue around 2.6 billion warrants and allot new shares to Carlyle and Advent.
The two PE funds hope to spend a total of Rs3,600-Rs3,900 crore (at a price of Rs14–15 per share) and end up owning 5% of the increased equity base each. The warrants will get converted into shares in future based on a pre-agreed strike price and timeline, typically 18 months.
From a high of ₹16.25 per share, it has seen a 55% drop to Rs 10.51 per share, in the last one year.
Yes Bank gained 5% to close at 14.29, giving it an Rs35,803.57 crore market capitalization on the Bombay Stock Exchange on Thursday.
To maintain SBI’s stake at 26%, Yes Bank is only permitted to issue a total of 3.8 billion warrants. As per the regulator-approved revival scheme, SBI’s stake in the bank cannot fall below the 26% threshold before March 2023. Currently, the largest state lender owns 30% of Yes Bank.
The transaction with JC Flowers is anticipated to be finalized by the end of September at the latest.
Even though conversations started at the beginning of the year, the new investors’ entry was delayed by the board’s reconstitution. It signals that the private lender is ready for a makeover, given that the earlier restriction imposed under the reconstruction process was removed.
RBI announced early last month that Yes Bank would exit the reconstruction scheme, following which a new board will be formed. This is over eight months earlier than the three-year timetable of the revival plan. However, the trading ban may not be lifted until March 2023 for stockholders.