Why Yes Bank shares are plunging despite $2 billion fund raising announcement?

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Published: December 3, 2019 12:59:14 PM

Shares of private sector lender Yes Bank extended decline on Tuesday, despite $2 billion fund raising plans announced by the bank.

yes bank says eight investors ready to invest 2 billion dollar in bankThe fall in Yes Bank the shares come after various brokerages raised concerns over the quality of investors.

Shares of private sector lender Yes Bank extended decline on Tuesday, despite $2 billion fund raising plans announced by the bank. Yes Bank share price fell by more than 5.30% to hit the day’s low at Rs 60.65 on BSE. Yesterday, the stock plunged most since November 13th. The fall in Yes Bank share price comes after various brokerages raised concerns over the quality of investors. “We have big reservations regarding the quality of investors that have bid and we doubt whether RBI will give approval to such investors who want to take more than 10% stake”, global brokerage firm Macquarie said in a report yesterday.

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Yes Bank had informed exchanges on Friday that it is in discussions with the family office of Canadian businessman Erwin Singh Braich, who has expressed interest in investing up to $1.2 billion in the bank. Further, ace investor Rakesh Jhunjhunwala’s wife Rekha Jhunjhunwala’s has also expressed interest to invest up to $25 million in the bank. Family office of Citax Holdings Ltd & Citax Investment Group are also looking to put in $500 million in the bank. Aditya Birla Family Office and GMR Group and Associates have also expressed their interest to invest $50 million each, according to the bank’s statement.  Yes Bank said that a ‘Top Tier US Fund House’ has also shown interest to invest $120 million in the lender. It did not disclose the name.  Discovery Capital ($ 50 million), and Ward Ferry ($30 million) were also among interested investors.

“To be honest we hadn’t even heard of SPGP Holdings/Erwin Singh Braich and Citax investments. These companies don’t even have an official website per se, nor does the billionaire Erwin Singh Braich have a Wikipedia link to describe him”, Macquarie added in its report. Notably, the global firm has retained an underperform rating on the stock with a target price of Rs 50 per share.

Erwin Singh Braich is a Canadian industrialist and philanthropist. He is the founder of The Braich Group of Companies and Trusts. He is the son of a successful businessman Herman Singh Braich who immigrated from Punjab to Canada in 1927. After his father’s demise, Erwin Singh Braich left his studies at University of British Columbia to take over the business. The second-generation 58-year-old Sikh fought a 14-year-long legal battle against the Canadian government for alleged bankruptcy, which he ultimately won. During the course of the court case, Braich even had restrictions on international travel imposed by the government. The net aggregate value of his conglomerate puts him among the elite in Canada.

Meanwhile, global brokerage firm Jefferies India has also retained its under perform rating with target price of Rs 38 per share. Jefferies noted that out of the total of $1.8 billion coming from family-offices, $1.7 billion is from two lesser known off-shore investors and both don’t seem to have very positive reputations going by a quick internet news search.

(Please consult your financial advisor before taking any investment decision)

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