YES Bank Acquires 9.9 Per Cent Stake In JC Flowers ARC

On September 20, YES Bank’s board had approved the sale of stressed loans worth Rs 48,000 crore to JC Flowers, after receiving no other challenger bids

In a regulatory filling, YES Bank said that subsequent acquisition of additional shareholding of 10 per cent is subject to requisite regulatory approvals.

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YES Bank has inked a share purchase agreement (SPA) with JC Flowers Asset Reconstruction Company (ARC) and acquired a 9.9 per cent stake in the ARC at Rs 11.43 per share. The private sector lender informed the stock exchange after market hours on Monday.

According to the regulatory filling, a subsequent acquisition of additional shareholding of 10 per cent is subject to requisite regulatory approvals, said YES Bank.

On September 20, YES Bank’s board had approved the sale of stressed loans worth Rs 48,000 crore to JC Flowers, after receiving no other challenger bids.

The bank intends to participate as a minority shareholder in the ARC. "This will be an ancillary to the main line of business of the bank", it said. As of 31 March, 2022, JC Flowers ARC had Rs 595 crore in assets under management with annual turnover of Rs 19.9 crore.

For the three-month ended 30 September, 2022, YES Bank's standalone net profit dropped by 32.2 per cent year-on-year (YoY) to Rs 152.8 crore. In the corresponding period of the past fiscal year, the private lender's net profit stood at Rs 225.50 crore.

Total income during Q2 FY23, however, was higher at Rs 6,394.11 crore as against Rs 5,430.30 crore in the same period a year ago. Gross non-performing assets (NPAs or bad loans) came down to 12.89 per cent of gross advances as against 14.97 percent in the year-ago period.

After transfer of bad loans to the ARC, bank's top boss Prashant Kumar believes the GNPA ratio can fall further to under 2 per cent.

Shares of YES Bank were trading at Rs 17.20 apiece on the BSE on Tuesday.

Meanwhile, Moody's Investors Services has upgraded YES Bank's long-term foreign currency issuer rating and long-term foreign and local currency bank deposit ratings to Ba3 from B2.

The bank's Baseline Credit Assessment (BCA) and Adjusted BCA has also been upgraded to b1 from b3.

The rating agency has also changed the outlook on the bank's ratings, where applicable, to stable from positive.

"The upgrade of Yes Bank's BCA and ratings reflects the bank's planned equity capital raise, which will support its credit profile and strengthen its resilience against potential asset quality risks arising from headwinds such as higher inflation and tighter global financial conditions," Moody's Investors Service said in a release.