Yes Bank plans $1-billion ADR issue next fiscal

Yes Bank will prefer raising money for its $1 billion capital infusion plan next fiscal through the ADR issue route. The mid-sized private sector lendor also stressed on the fat that a court order in a case involving its promoters will not impact these plans.

"The aspiration is to do an ADR (American depository receipts) issue. It will be our first such issue. It helps the profile of the bank and more diverse investors can come in," bank's president for financial markets Jaideep Iyer said. However, he admitted that the cost of raising capital through ADRs is higher than other instruments, and the bank will have to improve on compliance and corporate governance to meet the stringent norms by the US Securities and Exchange Commission.

The bank has its shareholders' nod to raise up to $1 billion either through an ADR or a Qualified Institutional Placement (QIP) issue.

When asked about the timing of the issue, Iyer said that it will most likely be in the next fiscal, saying the bank can sustain with the current capital even if it grows its asset book by 30% this fiscal. "The visibility of the issue is for next fiscal and not so much this fiscal. But we should have all the enabling provisions in place to do an issue," he said. When asked if the bank has an amount in mind, Iyer said such details will be worked out closer to the issue.

Yes Bank's larger rival HDFC Bank was the last lender raise capital via ADR, when it successfully raised Rs 10,000 crore earlier this year.
Other companies which have raised money through this route include Tata Motors, ICICI Bank, MTNL, Infosys, Vedanta, Wipro, the erstwhile Satyam Computers and Rediff.com.

For its tier-II capital, Iyer said the bank is already in the market to raise up to Rs 500 crore through a rupee bond sale, which will be subscribed by institutional investors. As against an enabling provision to raise up to Rs 10,000 crore, Iyer said it can do up to Rs 5,000 crore this fiscal.

Yes Bank has a case involving the bank's promoters. When asked about the impact of the Bombay High Court judgement -- managing director and chief executive Rana Kapoor and Madhu Kapur, who is the wife of late co-founder Ashok Kapur-- Iyer replied in the negative. "There is no impact of the judgement on our operations, it has nothing to do with governance issues. Even if we were listed on the NYSE today, we would comply with all the requirements," he asserted. 

It can be recalled that in a major setback to Rana Kapoor, on June 17, the Bombay High Court ruled that the bank's promoters should jointly nominate directors, thereby upholding the right of Madhu Kapur to nominate her daughter Shagun Kapur-Gogia on the board. Madhu Kapur holds 10.29% jointly with her children in the bank while Rana holds over 11%.

The court had also ruled that the appointment of M R Srinivasan as chairman was ultra vires the articles, and therefore null and void. Hence the so-called approval of RBI for that appointment was "inconsequential." The Bombay High Court had also held the appointments of other Rajat Monga, Sanjay Palve and Pralay Mondal as whole-time directors of Yes Bank were also prima facie ultra vires and void. Asked if the court order was a setback from the a perception perspective, Iyer said that a section of the media, which have called it as a setback to Kapoor, have misinterpreted the judgement.

The Bombay High Court had earlier in the month questioned the appointment of seven directors on the board of the bank by Kapoor.
Welcoming the order, the bank had said it will be seeking legal advice on the "infirmities" in the order.