3 Big Strategic Investors Cut Stake in Yes Bank (Between March 17-31)

Yes Bank Rescue – 3 Investor Banks Cut Stake within 2 Weeks of Investment

Introduction

After mounting an effort towards Yes Bank rescue, 3 big strategic investors cut stake in Yes Bank between March 17-31. According to the shareholding data from BSE, 3 private sector lenders have sold part of their stakes within 2 weeks of investment. Why these banks sold Yes Bank shares? What is Yes Bank’s future?

3 Big Strategic Investors Cut Stake in Yes Bank (Between March 17-31)

Yes Bank Rescue Plan – Total Infusion of Rs.10,000 Cr

• Government had approved a rescue plan for Yes Bank backed by SBI on March 13, 3030.
• Under the Yes Bank rescue, domestic investors including SBI, Housing Development Finance Corp, ICICI Bank, Kotak Mahindra Bank, Bandhan Bank, Federal Bank and IDFC First bank invested into Yes Bank.
• These 8 financial institutions jumped in to save Yes Bank from the edge of a collapse were seen as no less than heroes for coming to the financial industry’s rescue.
• When Yes bank was in alarming need of capital and facing pressure from depositors, the total investment infused by these strategic investors was Rs.10,000 Cr, at Rs.10 per equity share.

3 Investor Banks Cut Stake within 2 Weeks of Investment (Between March 17-31)

• Among these saviors who came to rescue Yes Bank from the edge of collapse, 3 investors are pulling out their investments. 3 big strategic investors cut a part of their stake in Yes Bank between March 17 and March 31, within just 14 days.
• Data released by Yes Bank on its shareholding pattern as of March 17 and March 31 shows that 3 of the 8 financial institutions have sold a part of their stake within two weeks of making the investment.

• Kotak Mahindra Bank :
  • From the initial subscription of 50 Cr shares, with face value of Rs.10 per share, Kotak Mahindra Bank infused Rs.500 Cr in Yes Bank rescue. The % stake it was holding in Yes Bank was 3.98% as on March 17.
  • However, the bank held 45.275 Cr shares in Yes Bank as of March 31, down 4.76 Cr shares. It means the bank cut its stake by 9.5% of 3.98% stake.
• Federal Bank :
  • While Federal Bank held 30 crore shares of Yes bank, infusing Rs.300 Cr in Yes Bank rescue as of March 17. The % stake it was holding in Yes Bank was 2.39% as on March 17.
  • But, now Federal Bank holds 24.13 crore shares, selling 5.87 crore shares within 14 days. It means the Federal bank cut its stake by 19.6% of 2.39% stake.
• IDFC First Bank :
  • The third bank that also sold part of its stake is IDFC First Bank. While it held 25 crore shares, infusing Rs.250 Cr as on March 17. The % stake it was holding in Yes Bank was 1.99% as on March 17.
  • The latest data shows that the bank has sold 4.02 crore shares and holds 20.98 crore shares as of March 31. It means the IDFC First Bank cut its stake by 16.1% of 1.99% stake.
• The other banks did not sell any stake as of March 31 data available on exchanges.
• ICICI Bank, which had subscribed to 100 crore shares of Yes Bank earlier with the infusions of Rs.1,000 Cr increased its holding by about 2 lakh shares as of March 31.
• Mr. Rajnish Kumar, chairman of State Bank of India, had remarked, that SBI will honour its commitment and will not sell a single share before the three-year lock-in.

Honouring the Investment Terms of Yes Bank Reconstruction Scheme

• There were some terms of investment detailed in the Yes Bank Reconstruction Scheme approved by the government and RBI on March 13, 2020.
• As per these terms, investors can sell only up to 25% of their investment over the next 3 years. It means for the 75% of initial investment has a lock-in period of 3 years. This lock-in period was part of rescue efforts to ensure that Yes Bank remains well capitalized.
• Thus, these 3 strategic investors – Kotak Mahindra Bank, Federal bank and IDFC First Bank are well within the above mentioned 25% selling limit even after cutting a part of their stakes.
• During March 17 to March 31, Yes Bank shares traded between a low of Rs.22 and a high of Rs.87. In short, this means these 3 banks that sold stake during this period could have made anywhere between 2X to 8X gains on their investment of Rs.10 per share.
• Given the current scenario where the COVID-19 related uncertainties may only add to asset quality pressures, capital conservation is also probably necessary for some of these banks.

Yes Bank – Current Shareholding (As on March 31, 2020)

• Thus after the stake cut by 3 private banks the top 9 investors in Yes Bank and their corresponding % stake as on March 31, 2020 is shown in the above table.
• LIC of India has bought almost 20.55 Cr Yes Bank shares with stake 1.64% as on March 31, 2020.

Shareholding Pattern (As on March 31, 2020)

• Total Holding of strategic Domestic Investors (8 Banks + LIC of India) cumulatively represents around 80.16% stake in Yes Bank as on March 31, 2020. SBI is the largest investor with 48.21% stake after infusing Rs.6,050 Cr in Yes Bank rescue.
• It indicates Indian Corporates are building a strong capital positioning and came as white knights to rescue Yes Bank at the right time after the Yes Bank Crisis.