MUMBAI (Reuters) - India’s Yes Bank is close to securing a deal to sell a minority stake to a global technology company to help boost its capital, the lender’s chief executive said.
“We are in fairly advanced level of talks right now,” Ravneet Gill, chief executive and managing director of the corporate and retail bank, told Reuters in an interview.
Gill said the stake sale was initially likely to be less than 10% initially but could rise, describing the buyer as one of the world’s top three technology companies that had not previously invested in a bank. He did not name the investor.
Yes Bank later said in a stock exchange notice on Tuesday that news about stake sales was “speculative”, adding that the it looks to raise funds as a normal part of its business.
“The bank in the usual and ordinary course of its business continues to explore various means of raising capital/funds through issuance of securities to diverse set of investors, in order to meet its business/ regulatory requirements, subject to compliance with prescribed procedures and receipt of statutory regulatory approvals,” it said.
The board has given India’s fourth largest private lender the go-ahead to raise more growth capital. The bank has approval to raise $1.3 billion but aims to bring in an additional $1 billion to $1.2 billion via a preferential allotment.
Under Indian central bank rules, an individual shareholder cannot hold more than 15% in a bank.
Gill said that “15% at the current market cap is not much but hopefully we will tranche the deal and as the price goes up that amount that we get for the deal will also go up.”
The bank has said the tech investment would help restore investor confidence in Yes Bank shares, which closed on Monday at 63 rupees, 77% below the level they were trading at the start of the financial year on April 1.
Indian markets are closed on Tuesday for a public holiday.
In addition to the tech investor, smaller investors could pump in about $200 million to $250 million, Gill said.
“There are two very large Indian family offices, there is a European and also an American private equity firm that have expressed interest,” he added.
In August, the bank raised nearly $275 million via a qualified institutional placement (QIP), a capital-raising tool commonly used in India, to improve its capital adequacy ratio.
Yes Bank’s common equity tier 1 capital at the end of June stood at 8%, marginally above the regulatory requirement of 7.375%. After the QIP, the ratio improved to 8.6%.
Gross non-performing loans as a percentage of total loans spiked to 5.01% at the end of June, weighing on the lender.
($1 = 71.7340 Indian rupees)
Reporting by Nupur Anand; Editing by Sanjeev Miglani, Edmund Blair and Alexander Smith