Shares of private sector lender Yes Bank plunged on Friday, after global rating agency Moody's downgraded its credit rating.
Shares of private sector lender Yes Bank plunged on Friday, after global rating agency Moody’s downgraded its credit rating. Yes Bank share price plunged by more than 11% to hit the day’s low at Rs 55.20 on NSE. The shares closed at Rs 56, or 9.82% lower. Moody’s Investors Service downgraded Yes Bank credit ratings due to stressed assets and low loss absorbing buffers against those assets. It also assigned a negative outlook to the company. Moody’s downgraded Yes Bank’s long-term foreign currency rating from “Ba3” to “B2. ”The firm noted that potentially stressed assets and low loss-absorbing buffers may add pressure to Yes Bank’s funding and liquidity. This may create additional risks to its standalone credit profile.
Apart from foreign currency rating, Moody’s has also downgraded foreign currency senior unsecured MTN program rating to (P)B2 from (P)Ba3, and Baseline Credit Assessment (BCA) and Adjusted BCA to b3 from b1. Moody’s noted that Yes Bank’s common equity tier 1 ratio of 8.7 per cent at the end of September 2019 will come under significant pressure, unless the bank can raise new capital in the next few quarters.
Moody’s observations comes days after the bank announced mega $3 billion fund raising plans. 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. However, global brokerages have raised concerns over the quality of its new 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 on December 3.