Carlyle and Advent close to picking up $1 billion stake in Yes Bank

22 Jul 2022 , 10:32 AM

Following the proposed sale of the lender's stressed assets to JC Flowers Asset Reconstruction Company and the formation of a new board, the effort by Yes Bank to enlist Carlyle and Advent as equity investors for roughly $1 billion has picked up steam, according to news reports.

This week, the senior management of Yes Bank and the State Bank of India (SBI), the private lender's largest shareholder, as well as representatives from the Reserve Bank of India (RBI), met with Carlyle's top brass from Hong Kong and Advent's leadership in order to finalize the details of the plan, which will be implemented in stages.

The proposed investment may be comparable to Bain Capital's $1.8 billion consortium investment in Axis Bank, which was made by the Boston-based private equity firm.

Beginning with a preferential issuance of new shares to Carlyle and Advent, Yes Bank is anticipated to first issue around 2.6 billion warrants.
The two PE funds hope to spend a total of Rs3,600-Rs3,900 crore (at a price of Rs14—15 per share) and end up owning 5% of the increased equity base each. The conversion of the warrants into shares will take place in the future based on a pre-determined strike price and time frame, usually 18 months.

On Thursday, Yes Bank gained 5% to close at 14.29, giving it an Rs35,803.57 crore market capitalization on the Bombay Stock Exchange.
To maintain SBI's stake at 26%, Yes Bank is only permitted to issue a total of 3.8 billion warrants. SBI's holding in the bank cannot fall below the 26% threshold before March 2023, according to the revival plan approved by the regulator. The largest state lender currently holds 30% of Yes Bank.

The average price over the previous six months serves as the floor for the warrant's strike price if it is issued on a preferential basis.
The deal with JC Flowers is anticipated to be finalized by the end of September at the latest, and shareholder approval for the new board members is anticipated to follow.

Even though conversations started at the beginning of the year, the new investors' entry was delayed by the board's reconstitution. Given that the previous restriction placed under the reconstruction process was lifted, it suggests that the private lender is ready for a makeover.

Yes Bank would withdraw from the rehabilitation plan, according to an announcement made by the RBI early last month. A new board would then be constituted. This is over eight months earlier than the three-year timetable of the revival plan. However, the trading ban may not be lifted until March 2023 for stockholders.