YES Bank May Raise Funds From Microsoft To Bolster Digital Banking

YES Bank is in discussion with three top technology companies, including Microsoft, to raise fresh capital, according to a media report. The private lender plans to induct one of them as a strategic shareholder to get funding and augment its digital ambitions, said two people directly linked to the discussion, the report said.

The bank is apparently looking at raising $1-1.2 Bn by December. According to media reports, YES Bank has been shown keen interest by both global private equity players and Indian family offices. Managing director and CEO of YES Bank, Ravneet Gill, was also quoted as saying that the bank is very close to getting capital from a technology company. The sources revealed the information on the condition of staying anonymous.

The report goes on to say that YES Bank has held discussions with Microsoft to sell a minority stake, which could fetch the bank around INR 2K Cr and such a deal may help the bank bolster its digital banking and payment system plans.

It is learnt that investor interest garnered by the ailing bank is over $2 Bn, which is nearly twice as much capital as what it plans to raise. The lender bank has been in desperate need of fresh capital and the potential investors may be picking up stake in the bank.

“Microsoft is one of the three global tech firms YES Bank has held talks with. YES Bank has appointed investment bankers as well to shortlist the global tech firm. The strategic partner may be allotted a board seat in the bank and RBI is aware of the bank’s plans,” according to the second media source.

YES Bank Under Pressure?

YES Bank saw a fall in its market value since last year because of its increased bad loans provisions. The bank’s stock has come down from ₹404 in August last year to ₹42.15 now.

Brokerage firm Sharekhan, while talking to the Economic Times, said YES Bank currently trades at around 0.4 times its FY2021E book value, which reflects concerns over its business outlook. There are significant challenges before the lender, with a large stressed pool, which at the current state of threshold capital position, is a key risk.

An assessment by the brokerage indicated that even if the bank gets equity infusion at twice the current market price, the same will lead to significant dilution of book value, which will not only be an overhang on the multiples but also impact return on equity (ROE). The bank henceforth has been under tremendous pressure to raise fresh funds.

Last month, YES Bank was also in talks with fintech major Paytm seeking investment. The deal was said to be under discussion and will only be finalised after Reserve Bank of India’s (RBI) approval. When Paytm had partnered with a non-banking financial company (NBFC), Clix Finance, to enable digital loans for both its customers and merchants, YES Bank also saw an opportunity to be included in Paytm’s digital lending business to scale up its own digital banking plans.