Yes Bank may sell a part of wholesale loan book to SBI
Having been in trouble, private sector lender Yes Bank Ltd might sell a big lump of its wholesale loan book to its lead investor, State Bank of India (SBI) to shore up liquidity, three people, considering the awareness they had of the talks amidst the two lenders, mentioned.
Yes Bank has already lifted ₹3,200 crore by downselling (selling loan exposure to another investor) its profit-making loan utility in ‘Safeway Concessions’, a subsidiary of Australia’s Macquarie group which operates various highway assets in India. Now looking to raise another ₹700 crore, after selling to SBI, by downselling its exposure in Warora Kurnool Transmission Ltd (WKLT) to SBI, the people cited above stated requesting anonymity.
In August 2018, Yes Bank had underwritten Safeway’s entire debt portion of ₹5,000 crore, making the financial closure for the project achievable for Macquarie, and to pay ₹9,681.5 crore upfront to National Highways Authority of India. Although, later, ICICI Bank took over a portion of the debt worth ₹2000 crore from Yes Bank.
Yes Bank will be able to reduce its wholesale loan book, with the sale of these two accounts to SBI,, which makes up 55.9% of its overall loan book of ₹1.7 trillion. “Yes Bank is looking to reduce its loan book by selling some of these exposures. However, it is not looking at many transactions,” the first of the two people cited above mentioned.
The sending of emails to SBI and Yes Bank remained unanswered.
Refinancing these loan exposures, for SBI, helps increase loan book growth, which has been hit due to the influence of covid-19. “The state-owned bank is eyeing high-rated customers to refinance a portion of its debt. Toll Operate Transfer (TOT) is an AA-rated account and that gives some confidence to SBI to take over these loans,” the second person stated.
SBI MD Arijit Basu said in an interview to Hindu BusinessLine on 3 July that the bank expects a flat growth in its corporate loan book this fiscal. The bank had reported a 2% growth in corporate loans in fiscal year 2020, however slowing from a 14% increase in fiscal year 2019. SBI expects to accelerate in credit demand only by the third quarter, according to the report.
The transaction amid Yes Bank and SBI comes at a time when the private sector bank is preparing for a ₹15,000 crore follow-on public offer (FPO) in the second week of July.
The equity capital will help Yes Bank to increment its capital adequacy ratio which presently stands at 8.5%.
Making it an associate bank, the fundraise is part of the Reserve Bank supervised rescue scheme under which SBI picked up 48.2% stake in the private lender.
Writer – Soumili Roy.