SBI to invest up to Rs 1,760 crore in Yes Bank FPO

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Published: July 9, 2020 1:32 AM

At the end of March 2020, Yes Bank’s capital adequacy ratio (CAR) stood at 8.5% and its common equity tier1 (CET1) ratio was 6.3%.

On Wednesday, the bank’s shares ended at Rs 26.10, 1.36% higher than their previous close. On Wednesday, Yes Bank’s shares ended at Rs 26.10, 1.36% higher than their previous close.

The executive committee of State Bank of India’s (SBI) central board on Wednesday approved an investment of up to Rs 1,760 crore in the follow-on public offer (FPO) of Yes Bank. The board of Yes Bank on Tuesday approved a proposal to raise capital through an FPO. The capital raising committee of the bank will meet again on Friday to consider and approve, among other things, the price band and discount, if any.

On Wednesday, Yes Bank’s shares ended at Rs 26.10, 1.36% higher than their previous close. At the end of March 2020, Yes Bank’s capital adequacy ratio (CAR) stood at 8.5% and its common equity tier1 (CET1) ratio was 6.3%.

At the end of March, SBI held a 48.2% stake in Yes Bank. The country’s largest lender has been closely associated with the process of rescuing the capital-starved Yes Bank since March, sending its then-chief financial officer Prashant Kumar to head the bank, apart from bringing in confidence capital. According to media reports, SBI may buy a part of Yes Bank’s loan book.

Earlier this month, FE had reported that Yes Bank is in advanced talks with a clutch of domestic and international private equity (PE) funds, who are expected to acquire stakes in the lender and a deal is likely to be locked by mid-July. SBI would continue to support Yes Bank through a fresh infusion of funds.

With the exception of SBI, financial institutions that had picked up stakes in Yes Bank in March to prevent the Yes Bank from collapsing and, thereby, causing a systemic crisis, are unlikely to bring in more capital in the next round of capital-raising. Most institutions have gone into cash-conservation mode after the Covid outbreak and are themselves tapping the markets for fresh rounds of fund-raising. Investing in the securities of another bank at this stage can be particularly capital-consuming for them as it attracts a 250% risk weight. In the first round, ICICI Bank, Axis Bank, Federal Bank, IDFC First Bank, Bandhan Bank, Housing Development Finance Corporation (HDFC) and Kotak Mahindra Bank had pumped in Rs 10,000 crore equity capital into Yes Bank in March.

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