The government has approved a bailout plan for the private sector lender Yes Bank, sources close to the deal said.
According to the plan, a consortium led by State Bank of India (SBI) and LIC will buy 49% stake in YES Bank at a mere Rs 2 per share totaling Rs 490 crore. The bailout will be executed in the next fortnight, multiple sources, involved with the development told DH. However, an official announcement to this regard is yet to be made by the parties involved.
In a filing to the BSE, the YES Bank has said that it has no knowledge about the issue and that they "haven't been contacted by the regulator yet." On the other hand, SBI said: "we will abide by the timelines under Regulation 30 of SEBI (LODR) Regulations 2015 in disclosing the developments if any."
YES Bank shares surged by 26% to Rs 36.85 per share after the news, while that of SBI's moved up by 1% to Rs 288.30 per share.
YES Bank's net worth of Rs 25,000 crore at present, is below the investment grade. It has tried but failed to raise equity capital in the past many months as fund houses have not been forthcoming.
The proposed acquisition of stake by SBI-led consortium will provide a much-needed lifeline to YES Bank, three sources close to the deal said.
It will, however, be an acquisition of the bank by SBI and not a merger. The latter may sell its stake in the private lender once the revival happens.
"The plan has been okayed by the government. The announcement in this regard is on cards. After the merger, it would be probably made a separate entity rather than a merger. There are chances of de-listing as well. Once the revival of the bank happens, SBI would sell the stake in the bank", sources added.
The plan, on which the government, RBI and SBI have been working for a month now, would be executed most likely by mid of March. According to the earlier plan, the RBI and SBI were supposed to be in a wait and watch mode till March 31.
"The shareholders will lose whichever way it goes," a source said.
RBI Governor Shaktikanta Das, however, declined to comment on the takeover of Yes Bank by SBI. To a pointed question in a media interview, Das, merely said that the RBI remained committed to ensuring that the country's financial system and banks remained strong and stable.
YES Bank's majority stake is controlled by retail investors after its co-founder Rana Kapoor exited the bank.
The lender had delayed its December quarter earnings amid an alleged depletion of CASA ratio, the stress in corporate loan book and bulging contingent liabilities. While the contingent liabilities are double of bank's balance sheet size, according to September filing, the total exposure to shadow lenders and developers -- who are caught in a cash crunch -- stood at 11.5%.
A Credit Suisse Group AG note in April marked Yes Bank out as the lender with the largest proportion of outstanding loans to large stressed borrowers, including Anil Ambani group companies, Essel Group, Dewan Housing Finance Corp. and Infrastructure Leasing & Financial Services Ltd.
Meanwhile, after the day's developments, JP Morgan reduced the bank's target price to Rs 1 per share.