Yes Bank shares gain 9% on reports of selling the stake to Paytm
Yes Bank ‘s shareholding structure could witness a major churn by the end of the year. As founder Rana Kapoor has initiated talk negotiations to sell his stake to Paytm. And Paytm Payments Bank’s parent One97 Communications Limited.
Independently, a Reuters story on Tuesday quoted Yes Bank CEO Ravneet Gill as saying that the bank was close to selling a minority stake to the global tech company as part of its capital raising exercise. Although the bank later denied these reports, Mint has independently verified that such talks could actually proceed to some extent.
The association of tech firms is expected to help further the bank’s digital ambitions. The bank is already in talks with large private equity firms for a capital infusion.On 30 August, the board of Yes Bank proposed to increase the authorized share capital of the bank from Rs 800 crore to Rs 1,100 crore to enable expansion in paid-up capital.
Stake to One97 Communications
If Rana Kapoor manages to sell his stake to One97 Communications, or any other shareholder. It will not make any difference to the bank’s capital structure. On the other hand, the issuance of fresh equity will cause the promoter’s stake to decline.
As indicated by senior officials of Yes Bank, the advertisers are set to cut back their shareholding following the articles of the relationship after the sale of the stake, enabling new investors to get a seat on the board.
Shagun Gogia told Mint, “If the bank decides to sell a minority stake to a global tech firm, we are ready to reduce the stake. Gogia is the daughter of co-promoter Madhu Kapoor and an additional director on the Yes Bank board. Madhu Kapoor and his offices hold a 9.17% stake in the bank as of June 30.
Kapoor and his family offices hold a 10.6% stake in the bank. A person close to the family of Yes Bank co-promoter Rana Kapoor said the sale of the stake to One97 would be completed through the stake by Kapoor and his promoter group unit Morgan Credit Pvt. Limited (MCPL); These two entities together hold about 7.34% in Yes Bank.
He said that since August, discussions have been held between several fintech firms including Kapoor. Yes Bank, and One 97 Communications Limited.
Procedures and receipt of statutes/regulatory approval
A statement issued by the bank to the stock exchanges stated: “In the normal and normal course of business. The bank will raise capital/funds through the issuance of securities to a diverse set of investors to carry out its business / regulatory. Various means continue to be explored. Subject to requirements, compliance with prescribed procedures and receipt of statutes/regulatory approval. “
The One97 Communications spokesperson declined to comment on the story. Kapoor also declined to comment on the story. An email sent to Yes Bank was also not answered.
If true, the deal would require RBI’s approval, given that One97 holds the license for a payment bank. Questions abound as to whether the license holder of the payment banks should be allowed to acquire a stake in the universal banks, as this can be seen as a workaround. In addition, the extension of the loss of One97 communications, as reported at the Mint on Tuesday, is bound to weigh in on the approval process.
Reliance Nippon Life Asset Management
Kapoor and MCPL also need to obtain consent from Reliance Nippon Life Asset Management Ltd (RNAM) to sell their stake, noting that approximately 7.34% is pledged with RNAM. When contacted, an RNAM spokesperson said, “Reliance Nippon Life Asset Management has not given any consent and is not in discussions with anyone about the pledged shares of this Bank.”
Yes Bank co-promoter Rana Kapoor and his family-owned firm MCPL had to pledge their entire 7.34% or 170.25 million shares with RNAM. This was done because RNAM wanted to convert previously unsecured loans (given to MCPL through non-convertible debentures) into a secured loan as the bank’s stock has lost 80% in the last one year.
Last year, MCPL raised Rs 1,160 crore by selling non-convertible debentures to RNAM. In November, Reliance MF was made a prepayment of ₹ 200 crores by MCPL. The loan agreement states that the value of Yes Bank shares (held by Rana Kapoor and MCPL) should always be more than double the debt.
The value of these 170.25 million shares on Tuesday is approximately Rs 1,182.13 crore.
Yes Bank is in desperate need of fresh capital
Yes Bank is in desperate need of fresh capital to stay well above the statutory requirement of 7.375% to improve its Common Equity Tier-1 (CET-1) ratio. The bank’s CET-1 ratio is slightly above 8.6% after completing stock sales of Rs 1,930 crore to institutional investors last month.
On August 16, Mint reported that it is raising an additional $ 600 million after raising $ 270 million from large investors through qualified institutional placements.
Yes, Bank‘s stock has been steadily falling since the RBI in August 2018 indicates that Rana Kapoor‘s tenure as the bank’s CEO will not be renewed after January 2019. Since August 20 last year, Its shares have lost more than 80% to Rs 63.10 as of Monday. BSE
Both MCPL and Yes Capital (India) Pvt. Ltd (which holds a 3.26% stake) is wholly owned by Kapoor‘s three daughters. In September 2018, after Yes Bank co-publicist Madhu Kapoor sold a part of his stake.
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