Mumbai: Private lender Yes Bank that has come a long way from being the 'darling of traders' to the 'biggest wealth destroyers' may soon have funds to stay afloat courtesy the taxpayers.
Anonymous officials with knowledge of the development have confirmed the theory that a consortium led by SBI and LIC would buy 49 percent in Yes Bank. Doing so, will save the lender the mad-scramble to raise as much as $2 billion to stay afloat.
Recent negative reports including analyst red-flags have dented Yes Bank's image from the 'darling of traders' to the 'biggest wealth destroyers'.
The news on taxpayer's money to rescue the ailing bank caused a flutter on the counters of Yes Bank as well as SBI. Both NSE & BSE asked both banks to confirm the development.
Yes Bank declined knowledge of the report while adding that it continued to explore various means of raising capital through issuance of securities to diverse set of investors to meet business/regulatory requirements.
The bank's spokesperson did not trash the media-report as outright speculative but only added that not receiving any official communication from the Reserve Bank, Government or from the State Bank of India to this regards.Click here, the PDF copy of Yes Bank's reply to BSE.
The reply from SBI Bank was cryptic. SBI said "we will abide by the timelines under regulation 30 of SEBI (LOD) regulations 2015 in disclosing the developments, if any in the matter to Stock Exchanges."
Investors acting on the development fanned the stock price up by 26 percent in intra-day gains thereby adding at least Rs 1,900 crores in market-capitalisation. Yes Bank scrips jumped 25.77 per cent (at 11.52 a.m.) to hit a high of Rs 36.85 a share. Shares of state-run SBI around the same time fell by 0.09 per cent to Rs 285.05 per share. At end of trading hours, SBI shares quoted Rs 288.30 per share. This development should make investments expensive for the consortium, if the government is keen to support the ailing bank.
Ever since former CEO and promoter Rana Kapoor departed in Jan'19 Yes bank has failed to control the issue of spiralling bad loans. It has so far received some bids to raise $2 billion, but none of them have materialised.
Failure of a bank, the size of Yes Bank coud lead to a crisis for markets, not to forget the severe damage to banking institutions in the country. And keeping that in mind, SBI chairman Rajnish Kumar hinted that Yes Bank "will not be allowed to fail". He also hinted "some solutions will emerge".
There were indications that the Hinduja Group with private equity firm Cerberus Capital Management LP was seeking to pick up a stake in the Bank. But, both Yes Bank and Hinduja Group are yet to divulge details.
The fourth-largest private lender had earlier delayed third-quarter earnings saying it was reviewing non-binding expressions of interest from four investors. In a filing to the BSE earlier, the bank has said it received non-binding expressions of interest (EoIs) from several investors including J.C. Flowers & Co, Tilden Park Capital Management, OHA (UK) LLP (part of Oak Hill Advisors), and Silver Point Capital.
Meanwhile, Twitter is trending with analysts suggesting the price of Rs 1 per share. Here are some tweets:
JP Morgan cuts Yes Bank Target Price to Rs 1
Stand corrected. Looks like SBI would just pay Rs.1 for the entire Yes Bank.— D.Muthukrishnan (@dmuthuk) March 5, 2020
Macquarie on YES Bank— Darshan Mehta (@darshanvmehta1) March 5, 2020
So ideally and theoretically speaking, SBI and other PSU banks need to buy the bank at Rs 1 pic.twitter.com/VpcbAr0LAL