Yes Bank, India’s fifth-biggest private lender, said on November 29 it will raise $2 billion through a massive issue of new shares to institutional investors and wealth managers.

Investors such as Hong Kong-based SPGP Holdings and the Canadian family office of Erwin Singh Braich (Singh) Sid said they have made a bid for the private sector lender's shares. The two investors have committed $1.2 billion of the total recapitalisation of $2 billion.

Not all financial analysts and brokerages are thrilled with the proposed investment of Singh in the bank.

Gobal ratings agency Moody's on Wednesday downgraded the ratings on Yes Bank, citing asset quality concerns and the shrinking capital buffers. The capital-raising plan announced last week has execution risks, it said.

A recent report by IANS, quoting anonymous analysts, said Singh was not even able to pay up Rs 2 crore for earnest money in the Reid & Taylor bid under NCLT earlier this year while SPGP, a Hong Kong-based fund, could not cough up investment in the Reid and Taylor case, reducing the chances of RBI giving approval.

Now, IDFC Securities, a broking and research business, said further background checks on lender Erwin Singh have thrown up ‘discomforting' revelations. “We have already included links to many legal proceedings in which Erwin Singh, potentially the largest investor in Yes Bank’s proposed capital raise, is involved. We dug up some more. The more we read, the more uncomfortable we get about his credentials,” it said in a note, which CNBC-TV18 reviewed.

IDFC Securities said owing to its background checks it is “more confident” that the Reserve Bank of India (RBI) will reject the application seeking approval for Singh purchasing a 25 percent stake in Yes Bank along with SPGP.

RBI approval is required for any stake of more than 5 percent. “If RBI is not convinced about the fit and proper status, getting approval for a 10 percent stake will be difficult, let alone the proposed 25 percent,” IDFC Securities said.

RBI is unlikely to hand over a controlling stake in an Indian bank to someone “who is tagged as bankrupt”, according to IDFC Securities. It said Singh has claimed on his website that the market cap of his assets based on independent valuations is $25-30 billion but there are no details of the assets or valuation methodology. “In fact, there are no financial details available about Erwin Singh except that he has been tagged bankrupt,” it said.

The IDFC Securities note has also listed a number of legal cases involving Singh. Singh has also promised to pay his debtors but that has also not been done yet, which is why his bankrupt status remains, it said.

First Published:Dec 6, 2019 4:07 PM IST