Carlyle plans to acquire 10% in Yes Bank for $500-600 million

Private equity group Carlyle is considering a Rs 3,750–4,500 crore ($500-600 million) investment in Yes Bank along with peer Advent International, according to people in the know. The lender is in talks with the private equity (PE) investors to raise Rs 7,500-11,250 crore ($1-1.5 billion) of growth capital to further bolster its balance sheet two years after the regulator put it under stewardship of the State Bank of India to stave off a possible run on its deposits.

The bank’s board, on January 21, 2021, approved a proposal to raise Rs 10,000 crore through modes including qualified institutional placements and foreign currency convertible bonds. That approval was to lapse on February 22, 2022.

Yes Bank has not been successful in attracting investors so far. In late December, the board approved an extension of the earlier proposal to raise capital in the form of equity, bond, warrants or any other equity linked security.

The proposed investment by private equity investors via preferential allotments could be similar to Bain Capital’s 2017 investment in Axis Bank that saw the Boston-based PE major lead a consortium that pumped in $1.8 billion to help shore up Axis Bank’s capital base after a string of disappointing earnings.

Both Advent and Carlyle are at an advanced stage of diligence and looking at finalising terms by the end of this month. The quantum of investments would then be finalised, sources added Current regulations allow nonpromoters such as PE players to buy up to 9.9% in banks, subject to approval from the Reserve Bank of India. Yes Bank’s current market capitalisation is Rs 32,596.47 crore. A 10% stake in the bank would thus be valued at Rs 3,259 crore. Both PEs are looking to each own 10%, with board representation. However, if the stock price surges, deal contours may get altered and potentially derailed as well. Carlyle declined to comment. Yes Bank did not respond.