Yes Bank seeks $2 bn in preferential new share issue

India's Yes Bank Ltd aims to raise up to $2 billion in a massive issue of new shares to institutional investors and wealth managers as it soaks up the impact of bad loans in the country's crisis-hit shadow banking and real estate sectors.

The plan, announced late on Friday, would see the country's fifth-largest private sector bank by assets seek to sell new stock worth close to its existing market capitalization of $2.4 billion at the close of trading on Friday.

As a major part of the plan, Yes Bank said it is in talks on a deal to sell shares worth $1.2 billion to Canadian billionaire Erwin Singh Braich and Hong Kong-based SPGP Holdings, which he backs. The bank said it expected those talks to close shortly.

SPGP Holdings did not immediately respond to a request for comment.

Shares of the Mumbai-based Yes Bank closed 2.5% lower ahead of the announcement on Friday. Its stock has risen about 20% since it said late in October it got a binding offer to buy shares of $1.2 billion from an unidentified global investor.

In its announcement, Yes Bank said other investors who have committed to buying shares include Discovery Capital, Aditya Birla Family Office from India and Citax Holdings Ltd & Citax Investment Group.

Discovery did not immediately respond to a request for comment, while Aditya Birla Family Office and Citax weren't immediately reachable.

It also said a leading U.S. fund house would subscribe, saying the name of the investor would be disclosed early next week.

Yes Bank's board of directors will meet on Dec. 10 to "finalize and approve the details of the preferential allotment and convene an extraordinary general meeting subsequently, to obtain the approval of the shareholders," it said.

The preferential allotment will also be subject to regulatory clearance. The approval of the Reserve Bank of India is needed to buy a stake of more than 5% in domestic banks.

Banking analysts say most of the funds raised by Yes Bank will be used to provide for bad loans. The lender's gross bad loans as a percentage of total loans - a measure of asset quality - spiked to 7.39% in the last quarter.