Rise in Yes Bank’s capital but challenges prevail

Analysts are of the opinion that Yes Bank’s $1.1 billion capital lift will aid to strengthen its balance sheet and supply it with growth capital, but it may not be an easy way ahead for the bank as the aim shifts to stabilizing growth. On Friday Yes Bank declared that U.S. private equity firms Carlyle Group Inc. and Advent International will be purchasing up to 10% of their stake for $1.1 billion. As a result of this news the private lenders share reached the highest in almost 4 months. Asutosh K Mishra, analyst at domestic brokerage house Ashika Stock Broking expressed expressed that it was critical for the bank to bring in credible, long-term equity partners, which they have achieved, and the market is cheering the news.

The analyst said that not long ago the companies choose an asset reconstruction firm owned by a private equity firm JC Flowers as the base bidder for the sale of bad loans of value 480 billion rupees ($6.08 billion), which will in return clean its balance sheet.Neverthless, the bank has to endure the challenges.

Mishra further added that the next aim for the bank will need to be  shifted to stabilizing  growth, and it might take up to  1-2 years to get back its business in order that it can become a private lender of meaningful size like previously,

In March 2020 there was a major decline in the financial position of Yes Bank, then India’s fifth largest private lender, causing contagion risk in the banking system.

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