Sunil Munjal, chairman of Hero Corporate Services Ltd, and Hemendra Kothari, veteran investment banker and founder of DSP Group, have held separate talks with Yes Bank Ltd to purchase stakes of 5-10% each in the cash-starved private lender, three people aware of the matter said.
The two businessmen expressed their intention to invest following discussions over the past fortnight, the people cited above said. If both investments proceed, the bank could receive a total of up to ₹3,500 crore, these people said on condition of anonymity.
“As per the discussions, the investment is likely to be done through the family offices of Munjal and Kothari. Both investors are willing to buy up to 10% (each), but the Reserve Bank of India’s approval will be crucial,” said the first person.
“He (Kothari) may try to buy 10% for ₹1,600 crore. The investment has to be cleared by RBI,” said the second person. Munjal may also invest an equal amount for a similar sized stake, the person added.
RBI approval is mandatory for any stake purchase of 5% or more in a bank.
Kothari’s family office has appointed Mumbai-based Arpwood Capital as the banker-cum-adviser for the deal, the second person said.
Munjal has been in talks with Yes Bank for a possible investment over the last few months, said the third person.
“Apart from Yes Bank, Munjal is looking for other possible investments as well in different financial institutions and startups, especially in the mobility space. Through all these investments, he is eyeing a minority stake where he will not be involved in the management of the particular entities. After his exit from Hero MotoCorp, he has funds available which he wants to invest in different institutions, of which Yes Bank is a part. Most of these investments are likely to be made through his family office,” said the third person.
Last year, Munjal, along with the Burman family of Dabur, had unsuccessfully bid for Fortis Healthcare Ltd.
Besides Munjal and Kothari, US-based private equity giant Carlyle Group has also evinced interest to invest up to $400 million in Yes Bank through a fresh equity issuance, said the first person.
Spokespersons for Yes Bank and Kothari’s office declined to comment, while emails sent to Hero Corporate Services and the Carlyle Group remained unanswered.
Yes Bank is in desperate need of money to stay compliant with RBI’s capital adequacy norms and create enough buffers to provision against bad loans in the coming quarters.
As of the September quarter, Yes Bank’s tier I capital adequacy ratio stood at 11.5% against the regulatory requirement of 8.875%. Its common equity tier 1 capital stood at 8.7%, marginally above the regulatory requirement of 7.375%.
The bank has met at least half-a-dozen large private equity firms and about a dozen foreign family offices since August.
On 14 August, Yes Bank raised $270 million through a qualified institutional placement. The lender has been dealing with a surge in doubtful loans over the past few quarters.
Yes Bank, on 31 October, said it has received a $1.2 billion binding offer for a stake purchase from a global investor.
On 4 November, billionaire investor Rakesh Jhunjhunwala bought 13 million shares of Yes Bank for ₹87 crore from the open market.
Despite posting a loss of ₹600 crore for the September quarter, Yes Bank’s shares have mostly been on an uptrend ever since it announced capital-raising plans.
On Monday, the stock surged 6% to ₹73 apiece on BSE, taking the bank’s overall market gains to 150% in the last 26 sessions.
This article was first published on livemint.com.