Rana Kapoor seeks to sell Yes Bank stake to PayTm
This will be the first time that a fintech company, or one of its promoters, acquires a commercial bank in India.
Rana Kapoor, a cofounder of Yes Bank is in talks with Paytm to sell his stake in Yes Bank. According to a report by Moneycontrol, Vijay Shekhar Sharma, the founder of Paytm, is negotiating the details for the acquisition of Kapoor’s stake, for up to Rs 2,000 crore.
.@moneycontrolcom Exclusive |
Rana Kapoor looks at exiting Yes Bank by selling his and his family’s stake to Vijay Shekhar Sharma for up to Rs 2,000 cr. Kapoor and his family hold 9.64% in #YESBANK of which 69% is pledged with Reliance Nippon Asset Management.@ShereenBhan pic.twitter.com/eC3kewNWh3
— CNBC-TV18 (@CNBCTV18Live) September 10, 2019
Kapoor and his family together own a 9.64 per cent stake in Yes Bank. Currently, this is evaluated to be worth around Rs 1550 crore. Of this holding, 69 per cent is pledged with Reliance Nippon Asset Management. Of the total stake pledged with Reliance Nippon Life, coming to about Rs 1500 crore, he has only repaid 30 per cent. Kapoor has apparently taken consent from the asset management company to sell his shares, along with that of his family’s, in order to clear debts to all creditors.
This is a step that could be financial history in the making, as this will be the first time that a Fin-tech company, or one of its promoters, acquires a commercial bank.
Transactions the other way around have occurred before, with Axis Bank acquiring FreeCharge, and ICICI buying a stake in ePayLater. However, this kind of acquisition will be a first, with a large number of regulatory challenges that are yet to be evaluated.
Yes Bank started operations in 2004, with Kapoor as one of its founders and promoters. Another cofounder was Ashok Kapur who was also the chairman of the bank. Apart from the 9.64 per cent holdings with Rana Kapoor’s family, Ashok Kapur’s family holds 8.33 per cent, bringing the total promoter holding in yes bank to 17.97 per cent. The Kapur family will retain its holdings in the bank.
Over the 2018-19 financial year, Yes Bank lost 80 per cent of its market value. According to Moneycontrol, 60% of Yes Bank’s profits have eroded in the past one year. Bailing out the bank would require an estimated Rs 8,000 crore, which means new shares would have to be issued. However, current RBI policies don’t allow promoters to hold more than 15 per cent shares in banks. With promoters already holding nearly 18 per cent, this public offering could be problematic.
Additionally, in 2015, Rana Kapoor was ousted as the CEO and MD of the bank by the RBI, which cited lapses in governance and poor compliance.
It is worth noting that on September 9, Yes Bank shares saw a jump, closing 4.5 per cent higher on the National Stock Exchange. The benchmark Nifty index rose by 0.52 per cent, and the Bank Nifty index rose by 0.94 per cent.
(With Agency Input)