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Carlyle, Advent to invest $1.1 billion in Yes Bank

Yes Bank was rescued in March 2020 by a clutch of financial sector entities after its capital ratios came close to breaching regulatory norms.

The bank’s shares ended at Rs 14.94 on the BSE on Friday, 2.47% higher than their previous close.

The Yes Bank’s board on Friday approved a proposal to sell a 20% stake in the bank for Rs 8,898.47 crore, or approximately $1.1 billion, to private equity (PE) players Carlyle Group and Advent International.

The development gains significance in light of the fact that the lock-in period for the private lender’s current investors, led by State Bank of India (SBI), comes to an end in March 2023. Yes Bank was rescued in March 2020 by a clutch of financial sector entities after its capital ratios came close to breaching regulatory norms.

The capital-raise will be in the form of a preferential allotment of 1.85 billion equity shares and 1.28 billion share warrants each to Carlyle Group entity CA Basque Investments and Advent affiliate Verventa Holdings. The equity shares will be allotted at Rs 13.78 per share and the warrants at Rs 14.82 each. After the allotment of the shares, both entities will hold 5.9% each in Yes Bank, which will rise to 10% each once the warrants are converted.

The bank’s shares ended at Rs 14.94 on the BSE on Friday, 2.47% higher than their previous close.

Yes Bank’s board also cleared a proposal to increase its authorised share capital to Rs 8,200 crore from Rs 6,200 crore. An extraordinary general meeting (EGM) of the bank’s shareholders will be held on August 24 to seek their approval for the fundraising exercise, the increase in the authorised share capital and the appointment of Prashant Kumar as interim MD & CEO, among other proposals.

Kumar, currently MD & CEO at the bank, said that the roping in of the two new investors is a testimony to the inherent strength of Yes Bank’s franchise. “We are excited about the incremental opportunities that this partnership creates for us and confident that both the investors will play a crucial role in the next growth phase of the bank,” he said.

Carlyle said in a statement that equity for the transaction will come primarily from Carlyle Asia Partners (CAP) V, a $6.6-billion investment fund managed and advised by affiliates of the PE firm, focused on buyout, strategic, and growth equity investments across a range of sectors in the Asia Pacific region. Carlyle will have one nominee on Yes Bank’s board following the transaction.

Sunil Kaul, managing director and financial services sector lead for Carlyle in Asia, said that the Group is confident about India’s long-term economic growth prospects and believes that Yes Bank is well-placed to capture this growth, given its strong capabilities in transaction banking and digital payments. “Yes Bank’s leadership team, led by CEO Prashant Kumar and under the direction of its board, has done really well in steering the bank through challenging times, and the bank is now well-positioned for the next phase of growth,” Kaul said.

In a separate statement, Advent International said that its equity stake in Yes Bank will be the firm’s first investment in a banking entity in India and Advent will have one nominee on the bank’s board following the transaction.

Shweta Jalan, managing partner, Advent International, said that the investment demonstrates Advent’s commitment to the country’s banking and financial services industry. “We look forward to working with the bank and to drawing on our sector expertise in supporting Yes Bank in its next phase of sustained growth,” she said.

Earlier this month, Yes Bank began the process of sweeping its legacy bad loans off its books as a preliminary step towards bringing in capital. It has announced a plan to invest Rs 350 crore to acquire a 20% stake in JC Flowers Asset Reconstruction (ARC), which it has identified as the base bidder for its Rs 48,000-crore pile of stressed assets. The bank has reportedly received two other bids during its Swiss challenge auction for the assets.

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