Why Is Macquarie Capital Even Suggesting Nationalisation of Yes Bank?
Foreign equity analysts such as Macquarie Capital, who had got their call on Yes Bank spectacularly wrong earlier this year is now raising the possibility of a nationalisation of the bank. This controversial suggestion would mean that the ordinary Indian would not only pay for the massive recapitalisation of public sector banks, but also pay for the blunders of private promoters,  who were not properly selected or adequately supervised by the Reserve Bank of India (RBI).  
 
Yes Bank’s struggles to raise funds have been making news over the past many weeks with the stock being roiled with every bit of news about possible investors who may help bail it out from the enormous mess left by its founder Rana Kapoor. 
 
After the board meeting yesterday, when the Yes Bank deferred a decision on a controversial binding bid from the Canadian investor Erwin Singh Briach to the next board meeting. 
 
Analysts expect more bad loans, higher haircuts due to slower resolutions and uncertainty around equity raising, given the sharp correction in stock price.
 
However, all of sudden, Macquarie Capital Securities (India) Pvt Ltd has suggested nationalisation of Yes Bank citing 'grave danger the lender may pose to the financial system'.
 
In a report, Suresh Ganapathy from Macquarie says, "If a collapse of non-banking finance companies (NBFCs) like IL&FS and DHFL could freeze up liquidity, a collapse of a bank could be a far more serious issue as banking is heavily based on trust and any freezing of the clearing system due to a collapse of a bank could choke the system and further jeopardize economic growth which is already in the doldrums."
 
Moneylife’s popular columnist R Balakrishnan calls this as a scene created by the brokerage, may be to manipulate stock price of Yes Bank. In a tweet, he says, “Why nationalisation? Just let it sink. Will be a good wake up call for people. How long will RBI keep junk in the economy? Sad if it is merged. Yes, let someone buy it if brave enough.”
 
 
Macquarie cited earlier cases of Global Trust Bank (GTB) and United Western Bank (UWB), which were taken over by Oriental Bank of Commerce (OBC) and IDBI, respectively. "In both cases, the banks were put under moratorium and the Reserve Bank of India (RBI) and the government came forward and did a forced merger," it added.
 
Apart from the stress in Yes Bank's books, Macquarie also warns about possible run on the bank deposits. It says, "We have already seen the deposit base declining for the past couple of quarters. We are mindful that a former deputy governor of RBI is on the (Yes Bank) board and closely watching the developments and how the situation is playing out."
 
Yes Bank has been struggling to raise money from markets and investors. Yes Bank’s recent board meeting was inconclusive as they still have not firmed up on who could be the potential investors. It has been close to nine months since the new chief executive (CEO) Ravneet Gill took over and they are yet to raise money. 
 
"When we had done a roadshow in Hong Kong and Singapore in September this year, we had clearly said that none of the 40 investors whom we met wanted to give Yes Bank capital. The struggle to raise money from quality investors shows us that investor interest in the stock continues to be very low," Macquarie says. 
 
Yes Bank's net worth is around Rs250 billion below investment grade book (rated BB and below) is around Rs300 billion. Even after factoring in operating profits for the next six quarters, Macquarie says total capital needed by Yes Bank would be at least about $2.5 billion to $3 billion over the next 12 to 18 months. 
Chartered accountant Ajit Mehta, in a tweet, calls Yes Bank as a directionless lender without any promoter. 
 
 
Earlier in August 2019, global ratings agency Moody’s Investors Service downgraded Yes Bank’s creditworthiness deeper into ‘junk’ status, citing concerns over lower-than-expected capital raising in recent times and the lender’s ability to raise more funds in the future. 
 
Moody’s also said that given the ‘negative’ outlook, an upgrade is unlikely in the next 12-18 months. Moody’s had mentioned in its note “Although the bank’s funding and liquidity profile has remained broadly stable, it compares weakly to other rated private sector peers in India. The negative outlook primarily reflects the risk of further deterioration in the bank’s solvency, funding or liquidity, as the bank continues to work through the asset quality issues and rebuilds its loss-absorbing buffers.”
 
At 12.46pm Wednesday, Yes Bank was trading 13.55% down at Rs43.70 on the BSE, while the 30-share Sensex was flat at 40,275.
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    Subramanian S

    2 months ago

    Good article

    m.prabhu.shankar

    2 months ago

    -:)))) Everyone is clear. Its middle class tax payers money that is easy to get. Now its for bailing out private banks. But for farmers a strict no no...--:::)))).

    Harish

    2 months ago

    Macquarie's Indian offices should be nationalised.

    Nishesh Jambudi

    2 months ago

    Can we buy if Yes bank goes below Rs 10 ?

    Ramesh Poapt

    2 months ago

    where is rana kapur, gogias by the way?!

    DHFL Insolvency: FD Holders Queuing Up to Submit Claims, Here is What You Need to Do
    Long queues of harried depositors were see at the Bandra office of Dewan Housing Finance Ltd (DHFL) to submit their claims forms following the glimmer of hope held out to them since the appointment of an administrator by the Reserve Bank of India (RBI). 
     
    As on 6 July 2019, DHFL had public deposits of Rs6,188 crore, which fell from Rs10,166.72 crore at the end of March 2018. There are more than one lakh fixed deposit (FD) holders in DHFL. 
     
    The FD holders of DHFL, many of whom are retirees who had invested their lives’ savings had invested in the company for a steady income and relying on the AAA credit ratings and 25-year history of the company.
     
    Pune bench of Debt Recovery Tribunal (DRT) has restrained any payments to creditors after a petition by Catalyst Trusteeship Ltd, on behalf of DHFL bond-holders, for recovering their dues worth Rs27,000 crore, in what is considered one of the largest failures of any non-banking finance company (NBFC).
     
    Experts have pointed out that since DHFL’s fixed depositors are unsecured creditors, they are behind secured non-convertible debenture holders like some mutual funds.
     
    Last week, R Subramaniakumar, the RBI-appointed administrator had asked all FD holders of DHFL to file their claims before 17 December 2019. This move suggests that FD holders, even though they are unsecured creditors, could hope to get at least a part of the money from the failed housing finance company, whose board was sacked by the banking regulator after over a year of turmoil and controversy.
     
    The National Company Law Tribunal's Mumbai bench had earlier admitted RBI's application for initiating insolvency proceedings against the failed NBFC, and permitted it to go ahead in the matter. 
     
    Mr Subramaniakumar said the insolvency resolution process is expected to be completed within 180 days from the start of the process or by 31 May 2020. DHFL is the first mortgage lender to be referred to the tribunal by the regulator. 
     
    Source: Draft resolution plan formulated by the company and shared on the BSE portal
     
    The RBI said there would be a debt moratorium on the company as long as the insolvency process is pending while filing the application for initiating corporate insolvency resolution process against DHFL.
     
    The cash strapped NBFC has already been hauled to the Bombay High Court by the State Bank of India, Union Bank of India and HDFC Bank for recovery of their dues. 
     
    DHFL had stopped paying all creditors after the Bombay HC order on 10th October put a stay on payments. The company had earlier stopped accepting public deposits and renewals of existing deposits and pre-mature withdrawals of existing deposits on 21st May.
     
    FD holders who have been running from pillar to post for their refunds need to understand the claims process. Many have been crowding the Bandra office merely for information, which is easily available from their website. 
     
    The entire claim process and the forms required to be submitted have been uploaded on the DHFL website. 
     
    The FD holders of DHFL have to submit their claims with proof on or before December 17, 2019, to the administrator at the address as below:
     
    Address: 6th Floor, HDIL Towers, Anant Kanekar Marg, Station Road, Bandra
    (East), Mumbai 400051 ; E-mail id: [email protected]
     
    As a fixed deposit holder, one needs to DHFL FD claim form for which Form CA can be downloaded from:
     
    FAQs for financial creditors in class filing Form CA can be read here:  https://www.dhfl.com/docs/default-source/downloadform/faqs-for-financial-creditors-in-class-filing-form-ca.pdf
     
    There are three names of Insolvency professionals (IRs) identified to act as authorised representative of creditors in a class and as a depositor, one needs to fill the name of any one of them. The three insolvency resolution professionals listed in the notice are Charu Sandeep Desai, Deepak Kumar and Pravin Navandar.
     
    The authorised representative will represent depositors in the meetings of the committee of creditors (CoC) and ensure that their views are communicated. The representative will also facilitate voting by depositors at these meetings
     
    The form CA has to be signed by the depositor at three places and if the depositor holds multiple deposits, only one claim form needs to be submitted with details of all deposits held by the individual.
     
    The following documents need to be attached with the Claim Form:
     
    • Copy of the FD certificate
    • Copy of Identification proof (PAN/ Aadhaar)
    • Copy of cancelled Cheque
    • Copy of death certificate in case the first depositor has passed away along with an affidavit stating the relation of the person submitting the Form with the first deposit holder.
     
    The claim Form CA needs to be scanned, along with the other supporting documents and emailed to [email protected] The last date for submitting the completed claim form along with all required documents is 17 December 2019.
     
    Non-convertible debenture (NCD) holders will be represented in this claims process by Catalyst Trusteeship Ltd — the debenture trustee for the bonds. The debenture trustee has been quite lethargic in its duties and it was only in June 2019, after DHFL first defaulted on a few obligations, that it disclosed the company’s failure to maintain adequate security for its NCDs of 2016-2018 vintage. DHFL had also skipped maintaining the 15 percent Debenture Redemption Reserve required by the Companies Act from last year. It was only after defaults surfaced that the trustee seems to have initiated legal action against DHFL for these slip-ups.
     
    The trustee was not very forthcoming in its communications with bondholders. Writing to DHFL’s retail NCD holders for the first time in August 2019, it sought their written consent for an inter-creditor agreement and a draft resolution plan, offering very sketchy details of what the plan demanded.
     
    Meanwhile, the Insurance Regulatory and Development Authority of India (IRDAI) chairman Subhash Chandra Khuntia said that exposure of insurance companies to the NCDs of debt-ridden DHFL will be written off using due process. While the exact figure is not publicly available, it is estimated that insurers have around Rs50 to Rs70 crore worth DHFL NCDs. But the identity of these insurers is not known. 
     
    From now on, Mr Khuntia has advised insurers to not merely rely on credit rating of such investment instruments and to do an independent review of the company and its financials.
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    Jaya Krish

    2 months ago

    I have also invested in NCDs. Do we need to do something in terms of submission of claim to Catalyst trusteeship? Can we expect our investment to be refunded by May 2020?

    Ketan Jinwala

    2 months ago

    Alert me

    Vijay

    2 months ago

    Please give alert to me...

    Ashok Bedia

    2 months ago

    Dear Sir, Mam , I had purchased some DHFL NCDs through icici direct. Could anyone confirm if Catalyst Trustee will file the claim form for me or I need to file myself/ approach someone else? A courteous revert is appreciated .

    REPLY

    Puneet Chugh

    In Reply to Ashok Bedia 2 months ago

    Catalyst Trustee will file for you

    Jaya Krish

    In Reply to Puneet Chugh 2 months ago

    Hi.. Please reply as to if we have to submit any claim to Catalyst. TIA.

    Anthony Gomes

    In Reply to Puneet Chugh 2 months ago

    Do I need to submit any consent form to Catalyst? I am stuck with NCD's as well. How do I stake my claim.

    Anchit Jain

    2 months ago

    Sir, I had purchased some DHFL NCDs through 5paisa.com. Could anyone confirm if Catalyst Trustee will file the claim form for me or I need to file myself/ approach someone else? Thanks very much.

    ozair musa

    2 months ago

    plz update

    Kochar Bipin

    2 months ago

    This is a very positive step - the MCA inspection report which was presented in Parliament already confirms that DHFL loan assets exceed it's declared debt by over 10,000 cr -

    Hence, the DHFL administrator should start honouring the debts in order of priority once list of unsecured creditors is verified.

    Radha

    3 months ago

    Who will come to the rescue of poor equity shareholders who have become heroes to zero by overnight??

    ishan Chakravarthy

    3 months ago

    Very frustrating

    REPLY

    RAVI KUMAR

    In Reply to ishan Chakravarthy 3 months ago

    FD holders should get their full money as it is hard earned

    krishna

    In Reply to RAVI KUMAR 2 months ago

    It is hard earned money for everybody,but I concur that the retail holders who hold the debt whether in secured NCD/ unsecured FD should be given priority over the others...Like weak banks are taken over by stronger banks and their liabilities transferred the same should have happened here but due to fraudulent activity at DHFL the same did not happen,this is a test case and hopefully both the regulator and the investors will learn their lessons because this is not the first and dare I say it may not be the last case of default.

    Dayaldas Parwani

    3 months ago

    [email protected]
    [email protected]

    RBI assessment reveals SBI under-reported bad loans by Rs12,000 crore in FY2019
    State Bank of India on Tuesday reported bad loan divergence of Rs 11,932 crore for the last financial year besides disclosing divergence of Rs 12,036 crore in provisioning for the financial year ending March 2019.
     
    The bad loan divergence means banking regulator RBI found SBI has under-reported its NPA by Rs 11,932 crore for last fiscal. The gross non-performing assets (NPAs) reported by the bank stood at Rs 1.73 lakh crore as on March 31, 2019. However, gross NPAs as detected by RBI was at Rs 1.85 lakh crore for the period.
     
    While the bank provided Rs 1.07 lakh crore against bad loans, the provisioning requirement as assessed by RBI stood at Rs 1.19 lakh crore, the bank said in a regulatory filing.
     
    Similarly, the net NPA was Rs 77,827 crore as compared to disclosed figure of Rs 65,895 crore, reflecting divergence of Rs 11,932 crore, it said. 
     
    As a result, the bank's fourth-quarter net profit of Rs 838 crore stands adjusted to a net loss of Rs 6,986 crore. This is after taking the additional provisioning into account, and there would be a subsequent impact of Rs 3,143 crore on gross NPAs, Rs 687 crore on net NPAs and Rs 4,654 crore on provisioning against bad loans in the third quarter of the current financial year.
     
    The divergences were part of the bank's Risk Assessment Report by RBI for the financial year 2018-19. Market regulator Sebi last month had directed all listed banks to disclose any divergence in bad loan provisioning within 24 hours of receiving RBI's risk assessment report. 
     
    Information on divergences is price-sensitive and needs to be disclosed quickly to shareholders, said Sebi.
     
    The RBI currently mandates disclosure of provisioning if in the central bank's assessment, it exceeds 10% of the reported profits before provisioning.
     
    Earlier Indian Bank, Union bank, Bank of India, Indian Overseas Bank are among the banks who have already announced divergences on their balance sheets on account of divergence reporting of NPAs and provisioning.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    m.prabhu.shankar

    2 months ago

    SBI under-reported means who ? Who is SBI ? Which are the officers who did this ? For whose benefit ? This is a public sector bank. We can understand if its a private bank where they do this to benefit the promoters and shareholders. Officers responsible for this mistake should be hanged in public for misleading the real owners who are the public of Union of India.

    Rajolu Ramam

    2 months ago

    State Bank of India is a Ocean. By merging the subsidiaries, it has become Pacific ocean. No body knows what is happening there. Except reducing the lending rates to please RBI and GOI (reduced 8 times in 2019). Is there any improvement in recoveries of NPAs. That is a big question MARK? Every time we hear only camaflageing of NPAs and increase /decrease of net profit. Has any body came across What was the lending, sector wise and most importantly the recoveries of loans and advances pertaining to Big industries, SMEs, AGRICULTURE AND OTHER PRIORITY SECTOR.

    Meenal Mamdani

    3 months ago

    Since the PSBs are protected by the govt, they don't really care about ordinary depositors. Perhaps the best way to teach them a lesson is for customers to punish them by moving their accounts to banks that don't lie on their financial statements.

    REPLY

    P M Ravindran

    In Reply to Meenal Mamdani 2 months ago

    The solution suggested is practically impossible. It cannot be that there are no provisions for punishment for lying in our statues. I know that there is serious punishment for perjury but I also know that no action is taken even in the grossest cases of perjury.

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone