YES BANK wants to raise transformation capital: Ravneet Gill, MD & CEO, YES BANK

YES BANK wants to raise transformation capital:

Ravneet Gill, MD & CEO, YES BANK

YES BANK MD and CEO Ravneet Gill has termed the over subscription of the recent QIP as a validation of the investors’ belief that the bank’s operating model was still relevant and that it had the ability to bounce back very strongly.

YES BANK’s recent Qualified Institutional Placement (QIP) was oversubscribed three times, raising a total of Rs 1,930.4 crore from qualified institutional buyers (QIBs). Two other IPOs in the market launched at the same time were under subscribed. The bank raised this amount in spite of demand for more funds because shareholders approved only a 10 percent dilution. The QIP took the bank’s CET-1 (common equity tier-1 capital) from 8 per cent to 8.60 per cent.

Gill also said that the bank was also in talks with technology firms for equity investment. We are looking for transformational capital. We want to raise capital from entities that can provide us with capabilities which strengthen our existing models. So, for instance, could some of these investors enhance our digital capabilities? Other than private equity, this could come from tech companies,”

“The raised amount gives us more breathing room, time to think about our future growth trajectory, and also the kind of partners we need to bring on board. Going forward, we will look at growth capital as well as transformational capital, which will help us diversify our businesses and differentiate ourselves as institutions,” Ravneet Gill said.

Gilladded that the successful offer was also an indication that investors were beginning to understand YES BANK better in terms of asset book and growth strategy.

On August 30, 2019, the board of directors of YES BANK approved a proposal to raise growth capital by increasing the authorised share capital of the bank to ₹1,100 crore from the current ₹800 crore.This would be done by increasing the equity shares to 450 crore equity shares of ₹2 each, amounting to ₹900 crore from the current 300 equity shares of ₹2 each that total ₹600 crore. The preference shares would be kept constant at two crore shares of ₹100 each aggregating to ₹200 crore.

YES BANK has always been seen as a well-structured financial institution.But equally there are two other businesses — retail bank and transaction bank, which are good but are undersized. Therefore, the bank saw it necessary to inform investors about its future strategy to scale up these businesses. YES BANK is currently looking to free up capacity for retail growth by cross-selling retail assets, which is important to generate liabilities as well as strengthen the liabilities franchise.

In connection with the recent Moody’s rating downgrade, the Global rating agency mentioned that the Bank's funding and liquidity profile has remained broadly stable.It is important to note that the standalone ratings (ex-Government support notch up) of most Indian Banks is sub-investment grade.

Meanwhile, YES BANK is talking to strategic investors and global majors who can significantly ramp up its digital footprint, especially data mining and analysis, which will give it an edge in risk assessment and open up new market segments.

On technological advancement, Ravneet Gill said, “There is a saying that banks will become technology companies with a banking license. From this perspective, I don't think there is another bank which is as digitally enabled as YES BANK. This is something the market has not recognised yet. We are looking for partners to help us build on our existing digital capabilities. We want to be in the forefront when banks become technology companies with a banking license.”YES BANK is also confident of expanding its CASA book and transforming itself into a highimpact-low visibility bank.