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<ul><li><keyword id="45660" type="General" weightage="20" keywordseo="yes-bank" source="Orion">Yes Bank</keyword> is open to acquisitions after its turnaround is complete and may acquire a microfinance institution to build its portfolio of high yielding assets. </li><li><keyword id="45660" type="General" weightage="20" keywordseo="yes-bank" source="Orion">Yes Bank</keyword> is no longer a candidate for any acquisition and will evaluate inorganic opportunities only if they add value. </li><li>Optimum size of a bank should be in the region of ₹5 lakh crore. Banks with a smaller balance sheet size would be more vulnerable to uncertainties or shocks. </li></ul>The private banking space is ripe for consolidation, as rising technology and compliance costs are making it harder for smaller banks to compete. In conversation with Business Insider, the CEO of Yes Bank, <keyword id="219963" type="General" weightage="20" keywordseo="prashant-kumar" source="Orion">Prashant Kumar</keyword>, says, “I am of the firm belief that consolidation is required. There is a huge fixed cost in banks, be it compliance or IT costs. There is a need for large banks. We have already seen the advantages of consolidation in the public sector.” The government has already set a precedent by merging several public sector banks, or PSBs, to create behemoths. In 2020, the government merged several banks to create seven large PSBs with a balance sheet of over ₹8 lakh crore. The mega consolidation was undertaken to create banks which would have a scale that would be comparable to other global banks. The ultimate objective was to create greater scale and synergy, which would lead to cost benefits. Kumar believes that the time is ripe for the same to play out in the private sector too. He reasons that as the sector needs players with a balance sheet size of over ₹5 lakh crore to feel relatively safe when dealing with unforeseen circumstances. The pandemic has demonstrated the kind of stress and risks that banks may have to face. Scale and diversified business models can enable these lenders to combat risks more effectively. According to Kumar, “Banks with a smaller balance sheet size would be more vulnerable to uncertainties or shocks. There is a need for consolidation, which would make the private banking sector stronger. Consolidation as such in the private banking sector will help strengthen the private banking sector. Smaller banks would not be able to upgrade themselves, as the costs are huge.” Yes Bank too is open to acquisitions, now that the turnaround is complete and it is focused on growth. To begin with the bank is looking at building a portfolio of reasonably high yielding assets, which it currently lacks. First up on its agenda is the acquisition of a microfinance institution. According to reports, the bank is in talks with Kedaara Capital to acquire a stake in Spandana Sphoorty. While a balance sheet of ₹3 lakh crore is not too small, Yes Bank is working towards becoming bigger. Explains Kumar: “We have a balance sheet of ₹3.5 lakh crore. I think our immediate pain point is private sector lending (PSL) and not having any high-yielding assets. Microfinance takes care of both issues. It would help meet PSL needs and give us a high-yielding asset. Once everything is fine then you look at inorganic growth.” While Yes Bank is open to inorganic growth, it is not yet ready to merge with a larger bank yet. Kumar says that he would look at inorganic opportunities if it adds value. However, he does not believe that Yes Bank is a candidate for a potential acquisition anymore. He says: “The strength of this bank is its strong franchise. Otherwise, coming back to normalcy cannot be done in three years. It does not make sense to become a target for acquisition. If you have a strong franchise, then you have strong capabilities on the management side or on the digital side. If you are lacking in some of these areas, then you can look at a merger to build strength in these areas.”

Private sector banking ripe for consolidation: Yes Bank ready for inorganic growth but not merger, says CEO Prashant Kumar

Just ahead of its mega <keyword id="20008249" type="General" weightage="20" keywordseo="FPO" source="keywords">FPO</keyword> opening to <keyword id="21332860" type="General" weightage="20" keywordseo="public-investors" source="keywords">public investors</keyword>, <keyword id="19899016" type="General" weightage="20" keywordseo="Vodafone-Idea" source="keywords">Vodafone Idea</keyword> (<keyword id="20062540" type="General" weightage="20" keywordseo="vil" source="keywords">VIL</keyword>) has announced closure of its anchor book allocation, raising about Rs 5,400 crore from marquee global as well as domestic investors, according to a statutory filing by the <keyword id="20132985" type="General" weightage="20" keywordseo="telco" source="keywords">telco</keyword>. This could be the third-largest anchor book after One 97 Communications and Life Insurance Corporation (LIC). One 97 Communications and LIC had raised Rs 8,235 crore and Rs 5,627 crore in the anchor round, respectively. In a notification to the exchanges on Wednesday, VIL said it has allotted 490.9 crore shares to 74 funds at Rs 11 apiece, which is also the upper end of the price band. This translated into a transaction size to Rs 5,400 crore. Of the total allocation to <keyword id="21330641" type="General" weightage="20" keywordseo="anchor-investors" source="keywords">anchor investors</keyword>, 79.52 crore stocks, or 16.2 per cent of the total, were allocated to five domestic mutual fund through a total of 11 schemes. Those who were allotted shares include GQG Partners Emerging Markets Equity Fund, Fidelity, UBS Fund Management, Abu Dhabi Investment Authority, Australian Super, Troo Capital, Morgan Stanley, Citigroup Global Markets Mauritius, and Jupiter Fund Management. Additionally, domestic investors, including Motilal Oswal Mutual Fund, HDFC Mutual Fund, SBI General Insurance and Quant Mutual Fund, were allocated shares in the anchor round. The Rs 18,000-crore FPO of Vodafone Idea will open for public subscription on April 18 and conclude on April 22, marking the biggest FPO in the country. The price band has been set at Rs 10-11 per share. Prior to this, the largest FPO in the Indian market was a Rs 15,000 crore share-sale by YES Bank in 2020. The fundraise would give the ailing telco the firepower to improve its positioning in the Indian telecom market, where it currently trails larger rivals such as Reliance Jio and Bharti Airtel, by a wide margin. The funds will also help VIL shore up finances for the much-delayed <keyword id="20366727" type="General" weightage="20" keywordseo="5G-rollout" source="keywords">5G rollout</keyword> and strengthening 4G services, and payment of vendor dues. On April 6, the VIL Board approved raising Rs 2,075 crore from promoter Aditya Birla Group and increasing its authorised share capital to Rs 1 lakh crore. Earlier this year, Vodafone Idea had outlined plans to raise Rs 45,000 crore through a mix of equity and debt as it looked to match services offered by rivals Reliance Jio and Bharti Airtel and arrest an alarming and prolonged subscriber churn. VIL has also been fighting a desperate battle for survival, saddled with debt of Rs 2.1 lakh crore and quarterly losses. According to Trai data, Vodafone Idea continued to bleed on the subscriber front. VIL lost 15.2 lakh wireless subscribers, plunging its mobile subscriber base to 22.15 crore in January, in sharp contrast to subscriber gains by Jio and Airtel.

Ahead of FPO, Vodafone Idea garners Rs 5,400 cr from anchor investors

IDFC First Bank on Sunday said it will make an equity investment of Rs 250 crore in beleaguered Yes Bank to acquire 25 crore equity shares. "...duly authorized committee of the Board of Directors of IDFC FIRST Bank Ltd had at its meeting held on March 14, 2020 accorded approval for an equity investment of upto Rs 250 crores comprising upto 25 crore equity shares at a price of Rs 10 each and face value of Rs 2 each, under the proposed Scheme of Reconstruction of Yes Bank Ltd under the Banking Regulation Act, 1949, subject to regulatory and government approval(s), if any," the bank said in a BSE filing. Earlier on Saturday, Federal Bank had committed to investing Rs 300 crore in Yes Bank for subscription of its 30 crore shares. The Centre on Saturday notified the YES Bank Limited Reconstruction Scheme, 2020, a day after the Union Cabinet approved a reconstruction plan proposed by the RBI for bailing out fund-starved Yes Bank. The authorised capital of Yes Bank has been increased to Rs 6,200 crore, Finance Minister Nirmala Sitharaman said on Friday. As per the reconstruction scheme, moratorium on the troubled lender will be lifted on March 18. Under the plan, state-run SBI will infuse Rs 7,250 crore in the crisis-ridden bank and take 49 per cent equity. As per the rescue plan, ICICI Bank will invest Rs 1,000 crore, mortgage lender HDFC Rs 1,000 crore, Axis Bank Rs 600 crore, Kotak Mahindra Bank Rs 500 crore, Bandhan Bank and Federal Bank Rs 300 crore each. There will be a three year lock-in period for all the investors. However, the lock-in period for SBI would be only for 26 per cent of shareholding. It would be 75 per cent in case of other investors. KKS RVK

Yes Bank gets Rs 250 crore from IDFC First Bank

SBI Chairman Rajnish Kumar on Saturday said the bank has received the draft scheme of reconstruction for crisis-hit Yes Bank. Bank officials are doing due diligence of the draft scheme, he added. "We have received draft scheme of reconstruction for Yes Bank. Our investment and legal team is doing due diligence," Kumar told reporters here. He also said many potential investors have approached SBI after seeing the draft scheme. Kumar further said the interest of shareholders will not be compromised. On Friday, the RBI announced a draft scheme of reconstruction for cash-starved Yes Bank. In its draft 'Yes Bank Ltd. Reconstruction Scheme, 2020', RBI said the strategic investor bank will have to pick up 49 per cent stake and it cannot reduce holding to below 26 per cent before three years from the date of capital infusion. The draft came a day after the RBI imposed a moratorium on Yes Bank, restricting withdrawals to Rs 50,000 per depositor till April 3. The RBI also superseded the board of the private sector lender, which is now being headed by former deputy managing director and CFO of SBI Prashant Kumar. See also: <a href="https://www.businessinsider.in/finance/news/finance-minister-assures-employment-and-salary-at-yes-bank-at-least-for-one-year/articleshow/74514015.cms">Finance Minister assures employment and salary at Yes Bank at least for one year</a> <a href="https://www.businessinsider.in/finance/news/yes-bank-share-price-falls-10-after-rbi-limits-withdrawals/articleshow/74504094.cms">Yes Bank share price nose dives 72% after RBI limits withdrawals</a> <a href="https://www.businessinsider.in/finance/news/rbi-has-a-new-scheme-to-rescue-yes-bank-will-be-released-shortly-says-shaktikanta-das/articleshow/74506268.cms">RBI has a new 'scheme' to rescue Yes Bank — will be released shortly, says Shaktikanta Das</a>

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Private sector banking ripe for consolidation: Yes Bank ready for inorganic growth but not merger, says CEO Prashant Kumar

Malini Bhupta

Ahead of FPO, Vodafone Idea garners Rs 5,400 cr from anchor investors

PTI

Yes Bank gets Rs 250 crore from IDFC First Bank

PTI

SBI says its evaluating draft reconstruction scheme for Yes Bank

PTI

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