Yes Bank gets $1.2bn binding offer from global investor

The troubled private sector lender YES Bank seems to be tiding over its woes, as the bank has said that it has received a binding offer worth $1.2 billion (approximately Rs 8,500 crore) – a deal that may face regulatory problems.

The bank, in a filing to the exchanges, had told that a global investor has agreed to invest money in it through fresh issuance of equity shares, subject to regulatory approvals and conditions. The bank would also need approval from its board and shareholders for this purpose.

Immediately after the bank made the announcement, the shares of the bank jumped by a whopping 30 %. The bank’s stock closed 24% up at Rs 70.45 per scrip, highest in many weeks.

The bank's shares had taken a terrible beating till the end of September -- dipping to Rs 29 per share from Rs 150 a year ago.

Earlier in September, the bank got approval from the Reserve Bank of India (RBI) to raise its authorised share capital to Rs 1,100 crore from Rs 800 crore.

The bank had been battling the increase in the contingent liabilities and a dip in the CASA ratio in the recent quarter.

The bank's co-founder Rana Kapoor, who was forced by RBI to step down from the post of CEO, has sold most of the stake in the bank, as debtors invoked the pledge owing to the margin calls amid tanking share price. As a result of this, Kapoor’s shareholding in YES Bank reduced to 4.72% from 10.6% a quarter ago.

RBI’s permit

However, the deal may face issues due to RBI regulations. Based on Wednesday’s market price, an investment of $1.2 billion through the issuance of fresh equity would mean that the investor would end up holding about 33% in the bank.

Under normal circumstances, RBI rules restrict a sole investor from holding more than 10% in a private sector bank.

However, according to updated rules released in 2016, there might be exceptions to this rule. For instance, a “regulated, well-diversified and listed/ supranational institution/ public sector undertaking/ government” can hold up to 40%, as per the circular dated May 2016.

While the bank hasn't disclosed the name of the investor till now and declined to disclose anything further, the sources suggest that it is a foreign investor.

The sources told that the central bank, till now, hasn't received any communication from the bank. "RBI will evaluate the investor and based on it we will decide further," said a source.