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Investors on Thursday seemed to have ignored the Yes Bank rating downgrade by India Ratings and postponement of the bank's December quarter results after the private lender said it is in talks to raise funds with JC Flowers, one of the world's largest distressed asset investors.
The shares of Yes Bank on the BSE advanced over 6 per cent on Thursday, a day after the company said it had received non-binding expressions of interest (EOIs) from the likes of J.C. Flowers and Co. LLC, Tilden Park Capital Management LP, OHA (UK) LLP and Silver Point Capital.
The buzz on Dalal Street is largely owing to the possible entry of J.C. Flowers at this juncture when Yes Bank is facing a make or break situation. Its failure would send shock waves through the Indian financial system, which is already jittery about the bank's survival.
"Delaying the quarterly results shows that they are not ready to expose their books to the auditors. This strategy is unlikely to work. The fresh investments, even if it comes will take time but for now Yes Bank's situation is worrying and a public sector bank will have to rescue it," said Deepak Jasani of HDFC Securities.
India Ratings also said it believes raising sizable capital in the very near term could be challenging and could require various regulatory and other approvals.
The two decade old J. Christopher Flowers-led US firm made its name by turning around several distressed companies in the financial services sector. The company has invested in 56 portfolio companies in 18 countries.
A Harvard alumnus, Christopher Flowers had joined Goldman Sachs in 1979 and became the youngest partner in 1988. He founded J.C. Flowers in 1998, and is known for successfully turning around Japan's Shinsei Bank.
Yes Bank has borne the brunt of several ratings downgrades due to the uncertainty over its capital infusion plan. A number of rating firms have red flagged the bank's exposure to stressed projects too.
The lender was earlier forced to turn down a $1.2 billion investment offer by Erwin Singh Braich as his offer announcement could not muster much confidence among investors on the Dalal Street.
Besides, Yes Bank's ex-independent director Uttam Prakash Agarwal has alleged that the bank's top boss is in violation of several regulatory norms.
The rating agency ICRA noted that Yes Bank's solvency profile remains weak with net NPA/CET of 36 per cent as on September 30, 2019.
Owing to uncertainty over its future, the bank, once billed as a favourite of traders, has gained the reputation of being one of the biggest wealth destroyers in the market.
The Yes Bank stock closed on Thursday on the BSE at Rs 37.20 per share - plummeting from a high of Rs 285.90 on April 4, 2019.
(Ravi Dutta Mishra can be contacted at email@example.com)