State Bank of India, which can pick up a maximum 49% stake in Yes Bank , as per the draft reconstruction plan drawn by the Reserve Bank of India (RBI), expects the upper limit of investment in the private lender to be no more than ₹10,000 crore.
On Friday, the RBI announced a draft plan that put the authorised capital of the bank at ₹5,000 crore with 2,400 crore equity shares of ₹2 each aggregating to ₹4,800 crore.
The board of SBI had approved a proposal to explore investment opportunities in Yes Bank after the government put a moratorium on the lender till April 3 and capped deposit withdrawal at ₹50,000.
Addressing the media,SBI chairman Rajnish Kumar said investors had shown interest in Yes Bank after the RBI floated the draft plan on Friday evening.
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“The [draft reconstruction] plan has been received by SBI and our investment and legal teams aredoing the due diligence on the draft scheme. There is time till Monday for us to go back to RBI with comments,” Mr. Kumar said.
“If SBI goes solo and picks up 49% stake, then immediate investment requirement is ₹2,450 crore,” he said. He clarified that a potential investor needs to comply with the fit and proper criteria of RBI if they want to pick up more than 5% stake, as is the norm.
“There are many potential investors after seeing the scheme. They have approached us. And there are some good names. Anybody who wants to go above 5%,
they have to meet the fit and proper criteria of the RBI,” he said. Observing investors sawopportunity in the country’s financial sector, Mr. Kumar said SBI’s investment team will hold discussions with the potential investors and then present a plan to the RBI along with other investors.
“That is a possibility but no firm decision has been made as of now,” he said. The bank, which is under the RBI-appointed administrator now, is valued at ₹10 per share but later, when the administrator is removed, a new investor will have to pick up stake at a value which will be decided by the pricing formula of the market regulator. Mr. Kumar expects Yes Bank to quickly come out of the administration. When asked about the valuation of Yes Bank, he said while SBI’s investment team was working the valuation proposed by the RBI, prima facie, the valuation looks fair.
“If it is ₹10 (per share) and [there are] 255 crore shares, then the value of the bank is ₹2,550 crore. The bank has 1,150 branches, they have a strong retail franchise, which has a very good technology platform. So, it appears the bank is worth ₹2,550 crore,” he said
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The SBI chairman said the impact on the capital position of the bank due to the investment will not be significant. “We have done our math. The capital ratios will not be impacted. There is very marginal impact on the bank’s capital adequacy ratio. All the ratios, as a policy, we maintain them at 50 bps higher than the regulatory requirement.
We will continue to do that without any further release of the capital,” he said. Mr. Kumar said there is‘no question’ of requesting the government for any capital. Mr. Kumar defended the government’s decision to rope in SBI for the bailout of Yes Bank and said a bank’s failure had a consequences for the economy.
“SBI is a national institute of importance. When there s a banking institution in particular, the survival of the bank is a must otherwise there is a huge contagion effect. We have to keep in mind, when it is a bank, whether it is small, medium or big, its failure has huge consequences for the financial sector and the economy.”
“If today, a resolution has to happen, realising that need, you need a credible name with the investors, creditors and depositors of the bank.
Yes, SBI is standing behind it, has been asked to stand behind it,” he added. Arm’s-length He clarified that the SBI will keep arm’s-length from the day-to-day operations of Yes Bank and there was no question of conflict of interest. The SBI will also not try to lure the next customers of Yes Bank.
“We don’t thrive in misery of others. One thing has to be very clear, that it is a strategic investment. Like we do with all our associate and subsidiaries, it will be a professional board and a professional management team.
The bank, as a shareholder and investor, hascertain expectations from the management team and the board. Other than that, there is no question of any conflict of interest. We will keep, not one arm’s-length but two arms’- length from Yes Bank,” he said.
