YES Bank jumps 6% as Carlyle, Advent International to infuse $1.1 billion

Consequent to the capital infusion, YES bank's CET-1 ratio (based on FY2022) would improve by 380bps to 15.4 per cent and total capital adequacy ratio would improve to 21 per cent

YES Bank
SI Reporter New Delhi
3 min read Last Updated : Aug 01 2022 | 9:47 AM IST
Shares of YES Bank surged 6 per cent to Rs 15.8 apiece on the BSE on Monday as the lender's Board decided to sell up to 10 per cent stake to US private equity firms Carlyle Group Inc and Advent International for $1.1 billion. 

At 9:35 AM, shares of YES Bank were up 2.7 per cent as against 0.3 per cent gain in the benchmark S&P BSE Sensex. A combined 86.92 million shares had changed hands on the NSE and BSE till the time of writing of this report.

"YES Bank will raise the funds through a combination of about $640 million in shares and about $475 million in share warrants. It will offer 3.69 billion shares to affiliates of Carlyle Group and Advent. The company will also issue 2.56 billion share warrants at a price of Rs 14.82 per warrant to both the investors," the private lender said in a statement.

Consequent to the capital infusion, the bank’s CET-1 ratio (based on FY2022) would improve by ~380bps to 15.4 per cent and total capital adequacy ratio would improve to 21 per cent. The impact on book value per share is quite negligible given that the stock is trading closer to book value but the infusion would result in ~15 per cent dilution to EPS keeping all other variables unchanged.

"This, along with the recent announcement of transferring bad loans to an ARC can result in the bank putting back all its legacy issues. However, the bank still needs to build a strong liability franchise and invest in key resources to compete on like-to-like basis. This would take time as the bank lacks a strong profitable moat," said analysts at Kotak Institutional Equities. 

It added that nearly all mid-tier banks are stepping up their growth engines and looking at faster normalization of long-term return ratios. YES Bank, it said, is also in a similar situation with the only exception with no strong profit pools readily available. 

"There is a possibility of long periods of low credit costs if the recovery of bad loans from the sale of ARCs is better-than-anticipated. However, it is too early to forecast them. This lack of differentiation and a valuation that reflects the current situation prevents us from being constructive," it said with a "sell" rating and a fair value of Rs 13.

One subscription. Two world-class reads.

Already subscribed? Log in

Subscribe to read the full story →
Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

Topics :Buzzing stocksYES BankMarkets

Next Story