SBI’s stake to go down below 26% after March 2023: Yes Bank MD

The stake of Yes Bank’s main shareholder, State Bank of India (SBI), is anticipated to fall below 26 percent after March 2023. This is due to the conversion of warrants given to private equity investors Carlyle and Advent, who have invested approximately $1.1 billion for a combined share of just under 20 percent in the private bank. The transfer of Rs 48,000 crore of bad loans to JC Flowers Asset Reconstruction, which has been finalised, will also result in an improvement in Yes Bank’s financial ratios for the latest quarter.

The $1.1 billion investment from Carlyle and Advent will be used to buy shares and warrants. Since the exercise would take place after March 2023, the warrants are priced at a modest premium to the shares. Based on the government-approved reconstruction plan, SBI, which had a crucial role in bailing out Yes Bank, must hold at least 26 percent of the company till March next year.

Yes Bank MD and CEO Prashant Kumar told The Times Of India that after the conversion of the warrants, SBI’s stake will drop to 24 percent from its existing 26.1 percent. According to him, the $1.1 billion capital infusion is intended to support growth, but it also demonstrates the faith that prominent investors have in the bank.

Kumar stated that by emphasising return on equity (ROE) and return on assets (ROA), the bank would be able to service a sizable equity base. He predicted that when the company achieves a ROA of 1.5 percent, the projected ROE will be 14-15 percent.

Kumar stated that he is enacting a cultural shift by characterising the equity problem as the end of the bank’s transformation. “We need to remind ourselves that we are a regulated financial entity and cannot work like a hedge fund or a private equity fund. Following fundamental risk-management guidelines in terms of diversification will be the most crucial component. While being aggressive is acceptable, risk management should never be compromised, he said.

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