Windfall gain for pvt banks on selling portion of Yes Bank stake

Domestic financial institutions, who have so far committed equity participation in the cash-strapped Yes Bank, stand to recover all their investments and make windfall gains on selling a portion of their holding allowed under private lender's restructuring scheme.

Seven private banks and state-owned State Bank of India (SBI) together have subscribed to 1,000 crore Yes Bank shares at a price of Rs 10 (face value Rs 2 and Rs 8 premium) to infuse Rs 10,000 crore. The subscription has been done at price which is much lower than Yes Bank's Tuesday share close price of Rs 58.65 (a gain of 58.06 per cent).

So, if a portion of shares is sold by the investors, they could get almost six times higher returns even while conforming to lock in conditions that stipulate private investors to remain invested for a period of three years with 75 per cent of their share subscription value.

ICICI Bank and the Housing Development Finance Corporation have committed Rs 1,000 crore each and subscribed to 100 crore shares each in Yes Bank. Even if these banks sell 25 per cent of investment i.e. 25 crore shares now, each could make close to Rs 1,500 crore at current price of Yes bank shares. So not only their entire investment would be recovered, a handsome gain will also accrue.

Other banks could also gain much more than their investment on the sale of only a portion of their shares.

"On the outside, selling the investment for quick gains looks possible. But I don't think any of the banks would like to make quick bucks in complete disregard to the commitment they have showed earlier to rescue a failing bank. Moreover, the anchor investor, SBI, has said that it will remain invested fully for a three year period. This should keep other private banks also invested," said a banking sector analyst asking not to be named over his association with some of the investors in Yes Bank.

At a Yes Bank press conference in Mumbai on Tuesday, SBI chairman Rajnish Kumar said that although he cannot talk about other banks, "not even a single share (of SBI) will sold in the three years".

SBI has been allotted 605 crore shares in Yes Bank for an investment of Rs 6,050 crore and would be the largest shareholder in the restructured bank with a stake of 49 per cent.

Other private sector banks have put in a total of 3,950 crore so far. Apart from ICICI Bank and Housing Development Finance Corporation with Rs 1,000 crore each, Axis Bank and Kotak Mahindra Bank committed to invest Rs 600 crore and Rs 500 crore, respectively.

Both Federal Bank and Bandhan Bank have been allotted shares for Rs 300 crore each as per their commitment and IDFC First Bank have been issued equity shares in the crisis-ridden bank for a consideration of Rs 250 crore. IANS