Paytm owner One97 in talks to pick up stake in Yes Bank

Bengaluru: Mobile payments major Paytm-owner One97 Communications is in preliminary discussions for a deal to pick up a stake in private sector lender Yes Bank. This is part of the Mumbai-based bank’s broader plan to raise fresh capital, said two sources familiar with the development.

The structure of the deal is still being discussed and much will depend on the approval from the Reserve Bank of India (RBI), as One97 and Paytm founder Vijay Shekhar Sharma already owns Paytm Payments Bank, said these sources.

“The talks are at an exploratory stage and the two parties still have to discuss the structure of the deal with which the RBI will have to be comfortable, given that One97 already owns a stake in a payments bank,” said one of the sources mentioned earlier, adding that there is no certainty of a deal going through. Institutional investors are allowed to hold up to 5% stake in a bank right now, above which it requires an RBI approval.

Multiple contours of the deal are being discussed, including fresh capital infusion or if Paytm will do it as part of consortium, the sources added. The discussions come at a time when Yes Bank has been facing increasing pressure to raise more capital as it has increased provisions for bad loans on its books.

Yes Bank and Paytm spokespersons declined to comment when contacted by TOI.

Last month, Yes Bank had raised Rs 1,930 crore through a qualified institutional placement (QIP) after which the company board has approved a further capital raise. After the QIP, Yes Bank CEO Ravneet Gill had told TOI in an interview on August 17 that it is looking to raise “transformational capital” from investors who can help it enhance digital capabilities. “Other than private equity, this could come from tech companies. We are in fairly advanced talks with some of them,” Gill said in the earlier interview.

While TOI could not ascertain which are the other parties in talks with Yes Bank, PE firms like TPG, Advent and KKR have reportedly held discussions. The bank’s share price has been constantly declining with the market questioning its asset quality. Compared to Rs 236 share price on March 11, Yes Bank shares closed a little over Rs 63 on Monday on the BSE.

Last month, global rating agency Moody’s said it had downgraded the bank’s long-term foreign-currency issuer rating to Ba3 from Ba1. Moody’s also downgraded the bank’s long-term foreign and local currency bank deposit ratings to Ba3 from Ba1, among other metrics.

“The downgrade of Yes Bank’s ratings takes into account: (1) the lower than expected amount of capital raised by the bank recently; and (2) the risk that the substantial decline in the bank’s share price will challenge its ability to raise sufficient capital to maintain the rating at its previous level,” the international rating agency added.

Among other strategic benefits for Paytm, a stake in Yes Bank could allow it to lend to its payments bank consumers via the Mumbai-based bank. Additionally, it can use the bank for the payment deposits of over Rs 1 lakh from its payments bank. At the end of the day, payments banks are not allowed to store over Rs 1 lakh.

“Yes Bank has a lot of interest in building out low-cost digital franchisee and also get a shareholder who has a long-term plan for India,” said one of the sources briefed on the transaction.