YES BANK – SBI TO SAY “YES, I DO?”

about 4 months ago
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The Govt can arm twist any of its PSUs to buy any company, sound or on the verge of bankruptcy. We have seen that happen often, more recently in the case of LIC forced to buy IDBI Bank.

And today, there were unconfirmed reports that SBI might be pushed to buy Yes Bank. The news said that the Govt has asked SBI to form a consortium and buy 10% stake in the private sector bank.

The stock exchanges sought clarification from both SBI as well as Yes Bank. And Yes Bank replied, saying, “the Bank has not received any such communication from RBI or any other the Government or Regulatory authorities or from the SBI and we are unaware of any such decision. Therefore, we are not in a position to comment on such news item.”

SBI did not deny this news outright but clarified, “we will abide by the timelines under Regulation 30 of SEBI (LODR) Regulations 2015 in disclosing the developments, if any in the matter to Stock Exchanges.”

This report brings into perspective the statement made by SBI Chairman in January, where he said that Yes Bank will not be allowed to fail and promised that some solutions will emerge to stabilize Yes Bank. Was this statement a preamble of things to come?

The Bank has been trying to raise funds for some months now. In September 2019, it announced that it plans to raise $2 billion. Following this, in Dec, its Board said that it was willing to consider the $500 million offer from London based – Citax Holdings’. That is yet to happen. Then it rejected the $1.2 billion investment offer from Canadian Erwin Braich/SPGP Holdings.

And now in mid-Feb, Yes Bank said that it received expressions of interest (EoIs) from FIIs like JC Flowers and Tilden Park Capital Management. We are yet to hear any concrete fund raising plan.

Its Q3FY20 numbers are scheduled to be released on 14th March and we hear that before the bank is desperate to show that it has adequate funds.

Ever since corporate governance issues were found, Rana Kapoor resigned and RBI refused to give him an extension, and asset quality became serious concern, Yes Bank seems to be shrouded in one trouble after another. It has been having real trouble raising funds and the Govt is perturbed – it cannot afford to have a bank of the size of Yes Bank going under. If this private sector bank goes belly up, it will have a huge domino effect on the entire banking and financial sector which still reeling under the IL&FS collapse.

But why should the Govt bailout a private sector bank? Why should SBI shareholders be punished for the inefficiencies of Yes Bank? If this news turns out to be true, one should really get wary of investing in any profit-making PSU bank or company as it is subject to the coercions and fiefdom of the Govt.

Our Editor, Mr.SP Tulsian is very calm about this whole thing said that he does not see SBI making any investment or acquiring stake in Yes Bank. He is of the firm opinion that the bank will be eventually taken over by one private sector bank, maybe Axis or Kotak and maybe at a valuation of Rs.20/share.

Well, as of now, we do not know who takes over Yes Bank but what is certain is that it will not be allowed to go under and bailout in one form or the other is sure.

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