Yes Bank weighs options to raise funds

Yes Bank, the new bank promoted by Rana Kapoor, is ready to raise capital, either through an initial public offering (IPO) or through private equity. It has already approached merchant bankers and made presentations to them.

Sources familiar with the development said that presentations had been made to Enam Financial Consultants Pvt Ltd and DSP Merrill Lynch. The pricing of the issue could be in the region of Rs 300 per share, sources said, which works out to a premium of Rs 290 on a share of Rs 10 face value.

This could be an indicative pricing based on the valuation of the bank - whether for offering shares to the public or placing shares with private equity investors.

The process of raising capital is expected to be completed in the next three months, sources said. Rana Kapoor, managing director and chief executive officer of Yes Bank, said the bank needed capital for constant growth.

"We are exploring various options to raise funds to assist the bank's growth plans. We could rope in private equity investors or tap the market. A final call has yet to be taken," said Kapoor.

Around four major private equity investors collectively hold 37.5 per cent of the bank's equity. These have a lock-in period of three years, except for Rabobank, Netherlands, which has made a commitment to hold on to its 20 per cent stake for five years.

DSP Merril Lynch acts as the bank's investment banker for its various banking activities.

"We have been in talks with DSP Merril Lynch to explore the right fund raising option for the bank," he added.

Yes Bank is around two-months-old with a loan portfolio of over Rs 200 crore. Its current capital base stands at Rs 200 crore and this will be expanded to Rs 500 crore by the end of 2005.

Of the additional Rs 300 crore, around Rs 100 crore is to be raised through a subordinated debt issue, which is slated for the first quarter of 2005.

Kapoor himself, along with non-executive chairman Ashok Kapur, holds around a 52 per cent stake in the bank.

The initial focus of the bank is on wholesale and corporate banking, while it would take time to build its retail portfolio.