MUMBAI (TIP): Yes Bank is gearing up to become the third Indian bank to have its shares listed on American stock exchanges. The youngest private bank has received a go-ahead from its board to raise up to $1 billion by way of American Depository Receipts or through a Qualified Institutional Placement. The permission follows a proposal to hike investment by foreign investors to 74% of the bank’s paid-up share capital from the existing limit of 49%.
The shares of Yes Bank jumped 7% to close at Rs 851 on BSE following the announcement on Thursday. At the current market price, the market capitalization of the bank stands at Rs 35,566 crore. “We are fully geared up for an ADR or any other form of capital-raising. For an ADR, we will have to additionally file the accounts in US GAAP,” said Rana Kapoor, MD & CEO, Yes Bank. The only two other Indian banks to be listed in the US are ICICI Bank and HDFC Bank.
Besides US Accounting norms, Yes Bank will also have to comply with the demanding Sarbanes Oxley (Sox) Act of 2002. In addition to changes in practices, Sox involves high legal costs for certifying compliance.
According to Kapoor, capital raising will be through primary issuance. “Depending on when we go to the market, we see a stake dilution of between 12-15%. Following the decision to do away the distinction between FII and FDI, we have the headroom to increase total foreign investment by another 28% of our capital,” he said. The enabling provision gives the bank room to time the issue in line with market conditions.