Yes Bank Shares See Recovery as Funding Plan Gains Approval

In a notable turn of events for Yes Bank, shares surged by approximately 2% during the early trading hours on June 4, 2023. This slight recovery comes after a significant drop of nearly 10% the previous day, a volatility that has shaken investor confidence. The uplift in share value follows the approval of a massive ₹16,000 crore fundraising plan by the bank’s board, reinstating optimism among stakeholders.

Market Performance Insight

Yes Bank’s shares opened at ₹21.18 on the Bombay Stock Exchange (BSE), an increase from the last closing price of ₹20.85. During the trading session, the share price hit an intraday high of ₹21.24, marking a rise of 1.87%. Eventually, the shares stabilized, trading around ₹20.97, indicating a recovery from the prior day’s extensive fallout.

Funding Plans of ₹16,000 Crore

In a regulatory filing, Yes Bank outlined its strategy for raising capital. The board has given the green light for a plan to secure up to ₹7,500 crore through equity funding. The capital will be raised via various eligible equity securities, while ensuring that the dilution of the bank’s total equity remains below 10%. This limitation also encompasses any dilution from convertible debentures.

In addition to equity funding, the bank is set to pursue debt funding of up to ₹8,500 crore. This could be denominated in either Indian rupees or foreign currency, but here again, the bank is adhering to the 10% dilution cap. This dual approach of equity and debt financing aims to bolster Yes Bank’s capital base amidst challenging market conditions.

Amendments to Articles of Association

The board’s approval also extends to modifications in the ‘Articles of Association’ of the bank. These changes relate to the share purchase agreement made with Sumitomo Mitsui Banking Corporation (SMBC) and the State Bank of India (SBI) on May 9. However, these amendments are pending approval from both the Reserve Bank of India (RBI) and shareholders.

Once authorized, the revised provisions will allow SMBC to nominate two non-executive and non-independent directors to the board. SBI will also gain the right to appoint one non-executive and non-independent director, reflecting the growing influence of these institutions in the management of Yes Bank.

Significant Foreign Investment on the Horizon

In a landmark development for Indian banking, a deal struck last month has resulted in SBI and seven other banks agreeing to sell up to 20% of their collective stake in Yes Bank to SMBC for ₹13,483 crore. This transaction is expected to make SMBC the largest shareholder in Yes Bank post-closure of the deal.

Specifically, SBI intends to sell its 13.19% stake for ₹8,889 crore, while smaller percentages will be sold by HDFC Bank, ICICI Bank, Axis Bank, Bandhan Bank, Federal Bank, IDFC First Bank, and Kotak Mahindra Bank for a combined ₹4,594 crore. This infusion of foreign investment is being perceived as a crucial step towards revitalizing Yes Bank and restoring investor confidence.

Conclusion: What Lies Ahead for Yes Bank?

The recent maneuvers by Yes Bank’s board indicate a strategic shift aimed at recovery and growth. The raised capital and influx of foreign investment could potentially stabilize the bank’s financial position and help it carve a stronger presence in the competitive banking landscape.

As Yes Bank navigates through this transitional phase, investors and market watchers will undoubtedly be keeping a close eye on upcoming developments, including approvals for the funding plans and the structural changes to its governance. Only time will tell how effectively the bank implements these strategies and what ramifications they will have on its market standing.

Disclaimer: The perspectives and investment advice provided by experts or brokerage firms on Moneycontrol are their own. Moneycontrol encourages users to consult certified professionals before making any investment decisions.