The government has approved a plan for country’s largest lender, State Bank of India, to lead
a consortium that will buy a stake in private lender Yes Bank, news agency
Bloomberg reported on Thursday.
State Bank of India has been authorized to pick other members
of the consortium and the announcement is expected soon, the report said.Following
the development, shares of YES Bank jumped 9.56 per cent to hit a high of Rs
32.10 on BSE. Shares of state-run SBI fell 3.01 per cent to Rs 276.70.
As per
media reports, SBI has been told to invest as a lead in a consortium in Yes
Bank. Though we may see a big spike in price of Yes Bank and negative reaction
in price of SBI, we recommend caution to retail investors. The critical thing
to watch would be percentage dilution of equity taking into consideration the
conversion of existing bonds issued by Yes Bank into equity," said
Abhimanyu Sofat, Head Of Research, IIFL Securities.
Earlier in January, the chairman of the bank had
expressed his strong belief that “some solutions will emerge” to bail out the
private lender.
YES Bank has so far failed to bring a strategic
investor. Reports recently suggested that the private bank had approached
mutual funds for raising fresh equity capital worth $300-$500 million.
The
private lender had earlier said it has delayed its third-quarter earnings as
the bank is reviewing non-binding expressions of interest from four investors.
YES Bank had plans to raise up to $2 billion to
shore up its capital base.
It had picked Cantor Fitzgerald, led by former
Deutsche Bank global co-CEO Anshu Jain, and local investment banks IDFC
Securities and Ambit Capital to raise funds that would help the lender expand
its loan book.
Recently,
the private lender received non-binding expressions of interest from investors
including JC Flowers, Tilden Park Capital, OHA UK and Silver Point Capital.
Also, a media report last month suggested
Hinduja Group was partnering with private equity firm Cerberus Capital
Management LP in seeking to pick up a stake in embattled Yes Bank.
However, nothing materialised till date.
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