Yes Bank to raise $100 mn tier-I capital by March

The route for the fund has not yet been decided.

Yes Bank is likely to raise tier-I capital worth around $100 million (Rs 465 crore) by March to fund its growth plans, according to Managing Director and Chief Executive Officer Rana Kapoor.

"We will get into the primary market earliest by November and not later than February/ March," Kapoor said.

Before tapping the equity market, the private sector bank would exhaust the $50-million tier-II capital limit, he said.

However, the bank has not yet decided on the route to raise the tier-I capital.

"It can be through QIP (qualified institutional placement) or global depository receipt or private placement. Quality of investors is very important for us," Kapoor said.

"We are not looking at ADR (American Depository Receipt)," he said.

Post-equity issue, private equity investors will have to cut their stake below 5 per cent each in the bank, while Rabo Bank's 20 per cent stake in the bank will also be down proportionately.

The Netherlands-based Rabo Bank received the Reserve Bank of India's approval to raise its holding to 20 per cent from 14.5 per cent in Yes Bank during the latter's initial public offer (IPO) in July 2005.

There have been no discussions of Rabo Bank hiking its stake in Yes Bank after the issue. "We want more investors to come in," Kapoor said.

Besides Rabo Bank, other major stakeholders are the promoters with 38.6 per cent stake and private equity investors owning 18 per cent.

Among private equity investors, while Citicorp International Finance has 7.4 per cent stake, Russell AIF Capital and ChrysCapital hold 5.56 per cent each.

These private equity investors will not be able to participate in the forthcoming equity issue, as according to RBI norms, no single entity can own more than 5 per cent stake in any bank.

In August 2004, the RBI had allowed the bank's promoters "� Rana Kapoor and Ashok Kapur "� to have a lock-in period for their shares until 2009.

"The promoters had 55 per cent stake in August 2004, which came down substantially to 38.6 per cent after the IPO and will come down further in the next issue," Rana Kapoor said, declining to give any more details on stake dilution.

Yes Bank hopes to have largest share in the retail banking business by 2010, Kapoor said.

"Retail will be in full cry in the bank by 2010," Kapoor said. The bank has 20 branches operational and has the RBI approval for 40 more.

"By October, we should have 30 branches and 50 by March," he said.

Lack of extensive branch network is posing a problem to the bank for having full-fledged retail operations. The bank plans to set up 100 branches by March 2008.

With the gradual expansion of branches in the last one year, the share of corporate loans to total loans has fallen to 65 per cent from 80 per cent.

However, corporates account for 80-85 per cent of its total deposits. Due to the tilt towards corporate deposits, the bank's cost of funds is 6.5 per cent.