Swiss Re to buy 3.57% in Yes Bank for Rs 120 cr

Leading global reinsurer Swiss Reinsurance Company will buy a small "strategic" stake in Yes Bank, which would be a prelude to cooperation in areas like risk mitigation products for rural and micro-finance sectors. Swiss Re will buy 3.57 per cent stake in the newest private sector bank for Rs 120 crore, subject to necessary approvals.

Rana Kapoor, managing director & CEO of Yes Bank, said, "The areas of future co-operation would include risk mitigation products for agri-rural markets and the micro-finance sector. The other area would be weather derivatives. We would also look at sustainability through corporate social responsibility initiatives."

The capital raising committee of the board of directors of Yes Bank today approved allotment of up to one crore equity shares on a preferential basis at Rs 120 per share to Swiss Re. The price is at 17 per cent premium over yesterday's closing price of Rs 102.50 of Yes Bank shares on the Bombay Stock Exchange.

An EGM of the shareholders of the bank will be held on November 20 to consider the preferential allotment.

"We see this as a strategic financial investment and see Swiss Re as a long-term partner," said Rana Kapoor.

The bank would sign a memorandum of co-operation with Swiss Re for risk mitigation products after the closure of the share purchase agreement. Launch of the products would happen in the following two-three months.

Peter Gujer, executive team member, Swiss Re Asset Management, said, "The investment represents a good opportunity to build a long-term partnership with a rapidly developing banking platform in India."

"The Indian macro economy in general and the banking sector in particular have significant growth potential and we believe that Yes Bank, based on its operating principles and a strong execution culture, is particularly well positioned to establish a successful business model within the sector," he said.

Post- issue, the promoters' holding will come down to 37.2 per cent from 38.6 per cent. Rabobank's stake will fall to 19.3 per cent from 20 per cent and the holding of private equity investors including Citicorp International, Russell AIF and Chrys Capital to 17.9 per cent from 18.5 per cent.

"We planned to raise $150 million of capital by March 2007. We have already raised $26.5 million through this investment and another $40 million through a lower Tier II issue from the domestic market. We will raise another $90 million before March 2007," said Kapoor.

Dhananjay Date, MD of Swiss Re India, said, "I think once the proper closure of the agreement is done, there could be further dialogue for India. But first we need to be given a branch licence in India for which we are struggling since the last four years. Swiss Re is always on the look out for opportunities to invest," he added.