INSUBCONTINENT EXCLUSIVE:
In the past, the troubled lender kept quiet rather than tell shareholders the truth about its bad loans
Now, under new management, it can't stop talking about an impending rescue
If the former approach nearly destroyed the bank, this latest strategy isn't going to help fix it.In early September, CEO Ravneet Gill told
Reuters that Yes was in "fairly advanced level of talks" with a top global technology company for a stake sale
In an interview with Press Trust of India earlier this month, Gill said the white knight would be a tech firm, a deep-pocketed family
office, a financial investor, or any two out of the three
"In future banks will become technology companies with a banking licence," he said.On Friday night, after reporting a September quarter loss
binding bid from a North American family office that hasn't previously invested in India
The other eager parties include a couple of Indian mutual funds and global buyout funds that have made a $1.5 billion overture, he said
Another consortium has shown up with a smaller $350 million offer
Everyone wants a piece of Yes Bank, it seems, except those tech suitors
They may not be able to participate immediately, according to media reports of what Gill is telling journalists now
And just like that, speculation that Microsoft Corp
would invest has gone out of the window.Will a White Knight Say Yes?Gill's hurry to close fundraising by December is understandable: Yes
is skating on a dangerously thin layer of capital
Gross nonperforming loans jumped to 7.4 per cent of total assets in September from 5 per cent in June
The Reserve Bank of India is already getting flak for neglecting supervision of a small cooperative lender and then trapping depositors by
The central bank won't take any chances - not with Yes losing 7 per cent of its deposits in one quarter
If the regulator puts the private-sector bank into its correctional facility for wayward lenders, there will be limits on risk-taking
The value of the franchise to any potential investor will erode sharply.So Yes can't count its chickens before the eggs have hatched
Gill says he informed the local stock exchanges about the binding offer of $1.2 billion because it was price-sensitive information
However, the disclosure had no details about how many shares will be sold and at what price
The bank's board is yet to weigh the plan
Regulatory approvals are far from certain.Will the RBI, which doesn't normally allow a single investor to own more than 10 per cent of a
bank, make an exception to save Yes? It did allow Canadian billionaire Prem Watsa's Fairfax India Holdings Corp
to buy 51 per cent of a small private bank based in Kerala, the first time it had permitted a foreign investor to assume majority control
That lender, now known as CSB Bank Ltd., has nevertheless been instructed to do an IPO and dilute Watsa's stake.For Yes, which is already
listed, the approvals will be more complicated
The central bank will assess the suitability of the acquirer and the extent of its control
Beyond this, though, the Securities and Exchange Board of India, the stock-market regulator, will have to bless the price at which new
A two-week average of high and low prices, the floor for an institutional placement, is a meaningless number for a stock whose trading
volatility is currently off the charts.Nothing Normal About ItWhat regulators seem to be missing - or turning a blind eye to - is that
volatility is being amplified by half-baked disclosures
News of the planned $1.2 billion rescue hit the market on the last Thursday of October, the day of expiry for monthly derivative contracts
Bears got trapped by a near 24 per cent rise in Yes shares
The very next day, the shares slumped 5.4 per cent, in anticipation of poor earnings.If the previous management was guilty of hiding the
lender's tattered asset quality, the new lot's premature hopefulness is thwarting orderly price discovery by giving rise to a cottage
Last month it was the turn of an Alibaba Group Holding Ltd.-backed payments firm to buy Yes Bank
Speculation last week had DBS Group Holdings Ltd
The Singapore bank denied the rumor.This everyday excitement is unhelpful
It would be nice to have Yes's board approve a concrete fundraising offer - one that has at least a reasonable chance of satisfying the
Then Gill can talk about a rescue as much as he wants.(Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and
He previously was a columnist for Reuters Breakingviews
He has also worked for the Straits Times, ET NOW and Bloomberg News.)Disclaimer: The opinions expressed within this article are the personal
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