Yes Bank Fundraising: Who Are The Investors?
Of the $2 billion in potential investment commitments revealed by Yes Bank, $1.8 billion has come from family offices.
Yes Bank Ltd. informed exchanges on Friday that the lender has “taken note” of interest expressed by several investors in participating in the bank’s capital-raising plans. The bank has taken a decision to raise $2 billion through preferential allotment, details of which will be finalised at the next board meeting on Dec. 10, the private sector lender said in its statement.
This comes after an extended period of uncertainty over Yes Bank’s fund-raising plans. Since taking over in March, the new Chief Executive Officer Ravneet Gill has said that he would be looking to raise at least $1 billion at a time when the lender needs to clean-up its balance sheet and return to growth.
The first tranche of the fundraising, via a $285-million qualified institutional placement in August, was small and investors were awaiting a larger fundraise. The larger fundraise of $2 billion announced on Friday, however, leaves several questions unanswered about the nature of investors.
Of the $2 billion in potential investment commitments revealed by Yes Bank, $1.8 billion has come from family offices, while the remaining $200 million is from institutional investors. From the large chunk of potential investments coming in from family offices, two investors—Erwin Singh Braich/SPGP Holdings and Citax Holdings & Citax Investment Group—are in talks to invest $1.7 billion. As such, while the number of investors stands at eight (including an undisclosed U.S. fund house), 85 percent of the funds may come from the two investors.
So Who Are These Two Investors?
Neither Erwin Singh Braich/SPGP Holdings nor Citax Holdings are well-known names in the Indian investment circle. So who are they and what businesses have they been involved in in the past?
In response to queries seeking clarity on the business interests of the two investors, their experience in financial services and any information about past defaults, Yes Bank said it is unable to comment on specific information on the investors. However, it added, the following:
- Bank has relied on specific reputed bank statements to cite availability of funds.
- We are in discussions to ensure money is available in an escrow account prior to the transaction allotment.
- Basis information made available to us, there are no ‘defaults’ on commitments.
- Basis information made available to us, both the groups have past experience in financial services with one of them also deemed fit and proper by a developed market banking regulator.
The bank said it could not comment any further when asked for further specifics. BloombergQuint has collated the below information from publicly available information.
Erwin Singh Braich/SPGP Holdings
A website by the name of www.erwinsinghbraich.com does not provide much information in terms of an overview of the group and its businesses. BloombergQuint could not ascertain whether this is an official website of the group.
The website provided disparate posts over the last two years.
In a post dated Jan. 16 2019, the website suggests that the corporation has multiple “EB-5 projects”. The EB-5 program, according to the website of the U.S. Homeland Department, was created to stimulate the U.S. economy through job creation and capital investment by foreign investors.
A post dated Dec.14, 2018, the website terms ‘Palais Royale’, a skyscraper in Lower Parel, Mumbai, as a marquee addition to the group’s portfolio. However, Ashwini Hooda, deputy managing director of Indiabulls Housing Finance, which is lender to the project, told BloombergQuint that Braich has nothing to do with the project.
Another post dated Nov.12, 2018, says the following: “It is anticipated that all of my lawful creditors, as at Oct. 1, 1999, will soon be receiving all funds due to them and owed by me. These repayments will include the original loan amounts, approximately eighteen million dollars (CDN $18,000,000), plus compounded interest, at the rate of interest equal to the Canadian chartered banks prime rate plus one percent, for the past nineteen years. This total amount will approximate thirty-nine million dollar.”
The post does not mention details on what these dues are on account of.
However, documents available on the website of the Courts of British Columbia, suggest that Erwin Singh Braich went through bankruptcy proceedings in the late 1990s and was declared bankrupt, with KMPG being appointed as the trustee following the proceedings.
The website and other publicly available information on the group does not throw up any prior investments in financial services either in India or overseas.
The only communication address available on the website www.erwinsinghbraich.com is an email link to firstname.lastname@example.org. BloombergQuint has sent an email to that address seeking more details on the group and its interest in Yes Bank.
Meanwhile SPGP Holdings, which is mentioned together with Braich as an investor, had initially expressed interest in investing in Reid & Taylor, as part of its bankruptcy proceedings. The court, however, dismissed the bid as SPGP did not end up paying the earnest money, shows a copy of the Mumbai National Company Law Tribunal order dated Jan.15, 2019. The court expressed its anguish at the inability of the investor to make good on its commitments. “This Bench is making all the possible efforts to somehow revive the Company in the interest of all the parties concerned but at the same time the manner in which the Hong Kong-based Company has come forward and painted a rosy picture to take over the Corporate Debtor and later could not raise up to the expectation of this Bench, as projected by them, this Bench expresses anguish for the same,” the order reads.
No financial information on SPGP Holdings is available on Bloomberg. No information on the Erwin Braich Family Trust is available either.
Should the investment by Braich/SPGP Holdings go through, the investors would end up holding about 30 percent in Yes Bank, based on a price of Rs 78 per share and the current dollar-rupee exchange rate, show BloombergQuint calculations.
The second large investor mentioned by Yes Bank is Citax Holdings Ltd. and Citax Investment Group.
Information available on the U.K. registrar of companies website ‘Companies House’ provides the following information about Citax Holdings:
- Nature of business: Activities of head offices
- Previous company names: Valti Energy Trading Ltd. (March 20, 2014 - May 30, 2017) Berwick Trade Ltd. (June 17, 2013 - March 20, 2014)
- Person with significant control: Srinivasan Solaraj who holds 75 percent controlling interest.
The latest filing made by Citax Holdings, with a balance sheet as of June 30, shows the company had total fixed assets worth 6.6 million pounds. Total shareholder funds stood at 20,107 pounds.
The same document goes on to add that the fixed investments made in the acquisition of Nagarjuna Oil Corporation of India. Subsequently, according to a news report in The Hindu, Citax Holdings failed to pay the bid amount.
No email address is available on the website where Citax Holdings can be reached. No financial information on Citax Holdings or Citax Investment Group is available on Bloomberg.
The Other Investors
The other investors proposed by Yes Bank include well-known Indian investor Rekha Jhunjhunwala, who has committed a $25-million investment. The family office of the Aditya Birla Group has expressed interest in investing $25 million, while the family office of the GMR group has expressed interest in investing $50 million.
Discovery Capital and Ward Ferry—the two institutional investors named—have committed $50 million and $30 million, respectively.
The fundraising plan would need the approval of the Reserve Bank of India. As per the bank’s notification to exchanges, no one investor will hold more than 25 percent in the bank. At present, the regulator permits an investor to hold 10 percent in a bank, except in exceptional circumstances.
Any investment over 10 percent would require the potential investor to undergo the RBI’s “fit and proper” test, which looks into the background of the investor including any their financial status and any investigations pending against them.
Both large investors will attract RBI scrutiny, said Jefferies in a note on Monday.
At current dilution, both the family offices will attract the RBI’s ‘fit and proper’ criteria as they will own more than 5 percent in a private sector bank. And that’s being seen as a big hurdle. If Yes Bank doesn’t get the requisite RBI clearance for these two investors, and given that there’s no big name in that list of investors, it may face a tough time maintaining regulatory capital ratios going forward.Nilanjan Karfa, Jefferies
Macquarie Research, while raising similar questions about the quality of investors also questioned the role of the board. “We also have serious reservations regarding the quality of the board of directors who are willing to consider these kinds of investors to be large shareholders, who don’t have the requisite experience,” Macquarie analyst Suresh Ganapathy wrote in his research note.
Nomura also acknowledged that RBI clearance would be needed for the two large investors. Even if the approval comes through, recovery will be slow.
“Fundamentally, a large capital raise would address the going concern worry for the bank, but as we have noted earlier, the road to PPOP (pre-provisioning operating profit) recovery will likely be tough and gradual, and there has been little success in resolution of stressed accounts involving Yes Bank in the past 12 months,” Nomura said in its note.