YES Bank will certainly raise funds through investments, said Ravneet Gill, managing director and CEO of the bank on Wednesday, adding that "the market, unfortunately, picked up that there may be some uncertainty around this".
The YES Bank board has taken no decision on the capital infusion offers before it, but has said that options are still under consideration. It said the board is favourably considering Citax Holdings and Citax Investment Group's $500 million offer.
The board decided that the final decision regarding allotment to Citax Holdings and Citax Investment Group will follow in the next board meeting, subject to requisite regulatory approval, the filing said.
The bank said in a filing to stock exchanges that the binding offer of Erwin Singh Braich/SPGP Holdings continues to be under the board's consideration.
Gill, in an interview with CNBC-TV18, elaborated on YES Bank's fundraising plans, why there was no conclusion regarding the same in the board meet and credentials of Erwin Singh Braich and SPGP Holdings.
Edited excerpts:
Q: Why didn’t YES Bank close that $500 million deal?
A: There were two reasons, which need to be understood. The first and foremost is that what we mentioned was that we wanted to complete the entire documentation before making the allotment, which is a process, which is underway. The investor has very clearly given a line of sight in terms of what investments have been liquidated to create the investment pool. Last night (Citax) has written to us saying that all details will be provided to us and they will be immediately approaching the Reserve Bank of India (RBI) for approval for their stake given the fact that it is going to be over 5 percent that is one number.
Number two is also you have to bear in mind that unlike when you raise money through public markets, preferential allotment is a very different sort of investment... I think the market, unfortunately, picked up this fact that there may be some uncertainty around this. But what I can tell you is that it was just a timing issue. So in that sense, the timing of the board meeting could have been better but in terms of the certainty of the money coming in of the investment - on that, there are no questions.
Q: Are they okay coming first up?
A: They are absolutely comfortable coming first up. It has no strings attached to it in terms of minimum amounts etc. They are looking at it as a standalone investment. It doesn’t come with any other conditionalities attached.
Q: What about them having the money itself? Whatever Google searches I did indicates it is a small group, and last time around in the Nagarjuna Oil case, the money did not come, so do they have the money, are you absolutely sure this will go through?
A: Yes, absolutely, the investor did speak with the CNBC-TV18 itself where they explained the Nagarjuna situation. But they have very clearly demonstrated to us what were the investments that the group owns, what exactly has got liquidated, instructions given to the banks to liquidate that investment for all of it to get collated. So we have full visibility as provided by the investor.
Q: How widely held is Citax, because this is also over 5 percent and you know the Reserve Bank of India’s (RBI) rules?
A: What we need to keep in mind is first and foremost if you look at the background of the investor, the investor has a financial services background. Second is that they have previously invested in banks as well. So they have that experience too. Given the reference checks that we did and obviously all the due diligence that has got around that I believe it is of an order which RBI will find very acceptable.
Q: You have not had any conversation with RBI just yet on whether Citax passes the ‘Fit and Proper’ test?
A: Informal discussions, of course, we have had, but quite clearly the formal process can only start once the board has finally approved the allotment. As you know that if there is an investor which is over 5 percent, then they need to approach RBI directly and Citax is doing that as we speak.
Q: Approximately, how much would Citax get at current levels, 20 percent?
A: No, just because there was one investment proposal that we talked about in the board meeting yesterday doesn’t mean that this is the only investment proposal that is on the table.
Eventually what percentage they will end up with will depend in terms of the overall size of the capital raised. I can tell you that we have a plan B and a plan C, it is just that we don’t want to be talking ahead of time. So we were clear and very deliberate on our thinking that lets us just talk about where we are in execution mode rather than where we are in the process of finalising the investment.
Q: I was asking only because... how much of a board seat will they get?
A: The issue is that in the offer that they made, they did ask for a board seat and it is something that is for the board to consider. My sense is that the board would be supportive of that.
Q: When do you think all this documentation and the money will be in? Will they put in an escrow, basically timeline as well?
A: I think this should be a very short timeline. Like I mentioned to you that last evening immediately after the board meeting, they wrote to us that this whole process is getting completed. They are immediately applying to RBI so I think it is a question of days.
Q: What is the status of that $120 million US fund you said, they have not agreed?
A: So that is off the table, but there are other investors there where there were conditions in terms of the minimum capital that we need to raise, which is what we are solving for. So that is a reason why we did not speak of those other investors.
Again like I said we are concurrently working on plan B, plan C. I think where we would just seek a little understanding from investors, from the market is that when you are working through a preferential allotment I think like I said that the way defines the relationship between the investor and the bank is very different... you need to have one preferential allotment close before you can move to the other one, we need to be very clear in terms of the sequencing and seeing that if you could bunch a couple of investments and do them together.
Q: Let us come to those people who said they are going to be conditional upon a certain amount of money. How much do these investors want before they will put their money in? Do they want to see $500 million on the table, do they want to see $1 billion, do they want to see $2 billion?
A: I would say that the amounts vary and not all of those bids are also conditional. Different investors had a different view with regard to how much money they would like to see for them to be able to participate.
Q: How much together you think you have, do you have a billion?
A: As I mentioned to you that there is a plan B, plan C, so we are working with a couple of other institutional investors and these are regulated entities. All of them have indicated sizes, which are fairly large. If these come through and we will have visibility on that reasonably shortly, I think we could end up solving for a much larger amount than the market is currently anticipating.
Q: Let me come to this Erwin Singh Braich offer. I mean we have all done extensive googling on the group. In his own website, he is tagged bankrupt and it is an undischarged bankruptcy. Why would you even keep it on the table?
A: What we need to be very mindful of is that one, if there is a binding term sheet that the banks receive as a listed entity, it is important to be able to disclose it and it is important to be able to put it to the court. Number two is that we can go by social media and what media reports there may be, I think it is only fair that you give the other party the chance to represent as well.
It is not as if these are decisions that the banks take lightly. I mean the due diligence is very extensive and it is very deep. Given the fact that this is a group, which is based in Canada, for instance, and has investments in other parts of the world, I think that entire exercise in terms of being thorough with due diligence has been an extended one. But again I think just to be able to come to a determination based on what may be there in the social media, I think would be a little hasty.
Q: I am reading the United States Bankruptcy Court District of Oregon’s decisions, not social media, they just happen to be on the net, but I am reading from the official document. You have Mr Gandhi on your board, is there even a reasonable chance that this will get RBI’s ‘Fit and Proper’ test even for 5 percent?
A: Again, I think it is very difficult for me to pre-judge what RBI may eventually decide in the matter.
Q: Mr Gandhi has not told you anything?
A: Obviously, we have discussed this in the board but the point is that discussion becomes pertinent at a time when we decide to accept the offer. It is an offer under consideration and no final decision made in the matter because everybody wants to go to the full due diligence etc. I think it is a little premature.
Q: Let me just get finally for YES Bank investors — by when you will have how much?
A: Our sense is as I mentioned to you that we have full visibility as far as the $500 million from Citax is concerned. That itself is not a very small amount... It is just that the context of the large amount that we are raising suddenly, that looks a little less than what the market may expect.
But all we are doing is that we are going to be very thoughtful in terms of what we disclose to the market with regards to progress in this regard. Because we are talking about large investors, we are talking about relatively large individual cheque sizes. So we are working on many other such opportunities as well. As they keep materialising we will obviously keep disclosing them to the market on a real-time basis.
Over the last couple of quarters, we have shown the ability to accrete capital organically, cut down balance sheets and monetise assets and keep the bank completely steady at an operational level.
...so just a little bit of patience, but I think we will solve for a much larger amount.
Q: When is the next board meeting?
A: The only reason we didn’t indicate the date is like I have mentioned to you earlier during our conversation that, for instance, the timing of the board meeting yesterday... we got it little wrong... we expected that there were couple of things which were progressing much bigger and we thought that we will be able to reach close but we could not. So that is why we did not put out a date for the next meeting but very clearly I think the intention of the board is to try and wrap up this matter as quickly as possible.
Q: You spoke about plan B and plan C, what are those?
A: Plan B and plan C are that we are talking to a clutch of institutional investors who have had great interest in India and are looking at this really as a strategic opportunity, who do not get distracted by short-term disruption that may happen here and there, looking at this as the platform for them to grow in India.
Q: It must be a tensed and packed day for you.
A: Not really tensed. Like I said that we just need to be able to manage expectations. In terms of our clarity and in terms of the certainty around the capital raised, we feel very confident.
First Published: Dec 11, 2019 11:45 AM IST
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