State Bank of India (SBI) on Thursday said it would invest Rs 7,250 crore in Yes Bank for a stake of up to 49%. SBI will buy 725 crore shares in the private sector lender at Rs 10 apiece. Other investors who are expected to pick up a stake in Yes Bank include lenders like Kotak Mahindra Bank, ICICI Bank and HDFC and high net worth investors Rakesh Jhunjhunwala and R Damani. Together they are expected to bring in close to Rs 5,000 crore. Some foreign investors may be roped in at a later stage for additional infusion of capital.
The size of the ‘problem book’ at the beleaguered Yes Bank is estimated by analysts at close to Rs 80,000 crore; stressed loans at the end of September 2019 were Rs 50,396 crore, up from Rs 43,482 crore at the end of June, 2019.
Thanks to steep increase in the BB and below pool in the last couple of years, the net stress loans at the end of September stood at 18.7%. The bank’s provision coverage was a little under 17%. Experts said around Rs 40,000 crore of the Rs 80,000 crore of the problem book may need to be written off. The lender will announce results for Q3FY20 on Saturday.
SBI said it has received approval for the same from the executive committee of its central board. The proposal submitted to the Reserve Bank of India (RBI) envisages a fresh issue of shares, over and above the existing 255 crore shares such that SBI will hold around 46% stake. The other investors are expected to hold 3% between them. On Saturday, SBI chairman Rajnish Kumar had said the bank would invest anywhere between Rs 2,450 crore and Rs 10,000 crore in Yes Bank depending on how many other investors came in.
Yes Bank has been struggling to find investors and raise about $3 billion needed to provide for bad assets and meet regulatory requirements. On March 5, the RBI imposed a moratorium on withdrawals from Yes Bank and superseded the bank’s board. Former SBI executive Prashant Kumar was appointed the administrator for Yes Bank.