Carlyle, Advent commit $1.1b to India's Yes Bank

The investment comprises INR 51bn (USD 640m) in equity shares and INR 38bn in equity share warrants, with the latter to be converted within 18 months of April 2023. Each private equity firm will purchase 1.85bn shares for INR 13.78 apiece and 1.28bn share warrants at INR 14.82 apiece, according to a filing.

Yes Bank’s stock closed up 3.1% at INR 15 on July 29, giving the company a market capitalisation of approximately INR 374bn.

Established in 2004 and headquartered in Mumbai, Yes Bank claims to be India’s largest and fastest growing full-service commercial bank and a leader in the digital payments space. It serves business and retail customers through a network of 1,140 branches across more than 700 cities and towns and provides investment banking, merchant banking, and brokerage services through Yes Securities.

The investment comes weeks after Yes Bank exited a government reconstruction scheme put in place in early 2020, which saw State Bank of India acquire a 49% stake in the lender. At the time, Yes Bank’s gross non-performing asset (NPA) ratio had risen to 7.39%, write-offs were INR 171.3bn, and capital raising efforts had ground to a halt amid ratings agency downgrades and customer withdrawals.

However, in the 12 months ended March 2022, net profit rebounded to INR 10.7bn after two successive years of heavy losses. This came as deposits reached INR 1.97trn, nearly double the March 2020 level, and the loan book grew 9% with gross disbursements of INR 700bn. The gross NPA ratio was 13.9%, down from 15.4% a year earlier.

Separately, Yes Bank recently announced that it had appointed distress and special situations investor J.C. Flowers to help offload INR 490bn in bad loans as part of efforts to clean up its books and facilitate capital raising to support credit growth.

The new equity capital will bolster Yes Bank’s capital adequacy and support business development. Carlyle is participating in the Yes Bank investment through its fifth pan-regional fund of USD 6.5bn, while Advent is currently deploying its latest global vehicle, which recently closed on USD 25bn.

Sunil Kaul, a managing director and Asia financial services sector lead at Carlyle, praised Yes Bank’s management team for negotiating a challenging period and noted that the lender is now well-positioned for the next phase of growth.

“We are confident about India’s long-term economic growth prospects and believe that Yes Bank is well-placed to capture this growth, given its strong capabilities in transaction banking and digital payments,” he said in a statement.

Shweta Jalan, a managing partner at Advent, added in a separate statement that India’s banking sector is at an inflection point where tech-enabled lenders like Yes Bank can enjoy an advantage.

For both groups, this appears to be their first investment in an Indian banking entity, although they have current and previous exposure to the wider financial services sector. Carlyle’s portfolio has featured SBI Life, HDFC, PNB Housing Finance, SBI Card, and India Infoline. Advent has backed the likes of Aditya Birla Capital and ASK Investment Managers.

Other Indian lenders have also turned to private equity when under pressure to improve capital adequacy ratios. This saw Bain Capital commit USD 1bn to Axis Bank in 2017 and Warburg Pincus participate in a INR 20bn capital raise by IDFC First Bank in 2020.

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• Topics
• South Asia
• PIPEs
• Financials
• India
• The Carlyle Group
• Advent International