India's Yes Bank gets backing from a big US fund as part of a $2 billion lifeline

Posted December 2, 2019 6:24 a.m. EST

— One of India's largest banks is raising billions of dollars from investors as it tries to shore up its struggling business.

Yes Bank, which is India's fourth-largest private lender, said in a stock exchange filing Friday that several investors had "individually expressed their agreement [or] willingness" to buy shares worth a total of $2 billion. That amount got a green light from the company's board, which will meet next week to finalize the allotment of shares. No single investor will be allowed to hold more than 25% of the company, the bank said.

The investors include international asset management funds Discovery Capital and Ward Ferry, along with several family offices. The biggest contribution from an institutional investor — $120 million — will come from a "top tier US fund house," the company said. It did not identify the institution, adding that the name would be disclosed this week.

That did little to impress investors, though. Yes Bank shares fell more than 6% in Mumbai on Monday.

One reason for unease: Only a small portion of the $2 billion commitment "is from well-known funds [or] investors," analysts at Nomura wrote in a research note Monday.

They added that while "a large capital raise would address the [on]going concern" for the bank, the company likely still faced a tough path to recovery.

Yes Bank's latest results were "significantly weak," Nomura analysts wrote in a note to clients last month.

The bank has struggled since its founder and CEO was forced out last year, and its stock has lost most of its value in the last year.

The bank has also come under increased scrutiny as India tries to clean up its banking sector, which is weighed down by tens of billions of dollars in bad loans.

— Rishi Iyengar contributed to this report.

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