Swiss Re wraps up Yes Bank deal

Global reinsurer Swiss Reinsurance Company (Swiss Re) on Friday completed the acquisition a 3.57 per cent stake in India's newest bank, Yes Bank, paving the way for possible collaboration in future for launch of insurance and other businesses jointly.

"The acquisition of a stake is a standalone financial investment. There is no formal arrangement, but this association could result in partnerships for certain businesses, including life and non-life insurance," said Rajat Monga, chief financial officer at Yes Bank.

The other businesses in which Yes Bank and Swiss Re could partner are agriculture and weather derivatives, weather insurance, risk mitigation products for microfinance and also in sustainability initiatives.

Yes Bank still has to gain enough financial muscle and the new business ventures, including foray into life and non-life insurance businesses, will have to be "synchronised" over a period of two to three years, Monga said.

Swiss Re acquired the stake for Rs 120 crore at a price of Rs 120 a share. Yes Bank shares closed at Rs 132.25 a share on Friday, down 0.90 per cent. Monga said the price that Swiss Re paid is at a 30 per cent premium to the six-week average price when the deal was announced on October 19, 2006.

The private placement of the stake is part of Yes Bank's plan to raise a total of $150 million of tier-I and tier-II capital by March 30, 2007. The bank has already raised about $90 million.

The balance will be a combination of upper tier-II capital and issue of fresh equity shares, either through private placement or qualified institutional placement.

The paid-up share capital of the bank has now increased to Rs 280 crore. The total capital base of the bank, including tier-I and tier-II, is now over Rs 1,000 crore.