The Hindu Business Line : Plans staggered capital infusion

THE baby of the Indian banking pack — YES Bank Ltd - is embarked on a five-year health plan. The fledgling bank is working on plans for three separate capital-raising exercises staggered over the next five years to bolster its strength.

According to the bank's Managing Director and Chief Executive Officer, Mr Rana Kapoor, the first dose of raising fresh capital is expected to take place within the next four months. "We have to decide between an initial public offer (IPO) and seeking private equity. Both options are open to us. We would discuss them at the board level soon," Mr Kapoor told Business Line.

He said that the future plans included a second capital injection after about two-and-a-half years and the third one during the fifth year of the bank's operations. "We would have to inject capital along with the growth of the bank's business," Mr Kapoor said.

The first capital raising exercise is expected to raise Rs 250 crore-300 crore. Mr Kapoor said that several private equity investors have already evinced interest in investing in the bank.

However, he hinted that the IPO might be a preferred route for raising capital in the near term. "IPO is a good alternative. It brings about greater transparency, public accountability and reporting requirements. Transparency will lead to greater trust in the bank which is essential for a brand new entity like us," Mr Kapoor said.

YES Bank currently has a paid-up capital of Rs 200 crore. While the two Indian promoters — Mr Rana Kapoor and the bank's non-executive Chairman, Mr Ashok Kapur - between them hold 52 per cent of the equity of the bank, Rabobank of the Netherlands holds 20 per cent. Out of the remaining, 25 per cent equity is shared between private institutional investors - CVC-Citigroup, AIF Capital and ChrysCapital.

Mr Kapoor said that the three time capital raising exercise would automatically bring down the holding of the Indian promoters to below 10 per cent, the threshold limit being proposed by the Reserve Bank of India for holding by a single person of group of related entities.

"As promoters our contribution is a one-time exercise. As we raise fresh capital, we expect our shareholding to go down to below 10 per cent each after five years," Mr Kapoor said.

YES Bank, which started functioning as a scheduled commercial bank recently, has limited operations at present.

Mr Kapoor said that the number of branches is expected to go 30 by the end of March 2006, to 60 by March 2007 and 100 by March 2008. "We want to consolidate before applying to the RBI for fresh licences," he said.