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Yes Bank Stake Sale Deal, Will two negatives make a positive?


A story about Rana Kapoor planning to offload his stake to One97 Communications Ltd. parent company of the Paytm and Paytm Payments Bank, by the end of this year. 

This could be a much required positive for the shareholders of the struggling bank. If this arrangement goes through, it will be a win-win situation for both the Bank and the fintech giant. While Yes Bank with this collaboration can expand its digital banking footprint, One97 Communications Ltd. on their promoters will be the first fintech player to have sizable stake in a commercial bank.

Yes Bank has for a long time been talking to large private equity firms for a much needed capital infusion. The banks board has proposed for increasing the paid-up capital from Rs.800.00 crores to Rs. 1100.00 crores. However the present preposition will not help in capital infusion.

One other hand Paytm along with its subsidiaries is also struggling with its business and the losses have been widening every year. For the previous fiscal year One97 Communications has posted a loss of Rs. 3960.00 crores which mount 165% from Rs. 1490.00 crores reported in the FY18. Paytm has been investing a billion dollar each year from last couple of years and has planned to invest $3 Billion in next two years towards achieving its long term objectives. 

Getting into an arrangement with a commercial bank, Paytm can widen its digital footprint along with providing vast range of services to its over 350 million registered users. Paytm has also set a target of achieving 12 billion transaction by end of FY20 

Rana Kapoor lost a legal battle against Madhu Kapoor, his sister-in-law in 2015 over board appointments, which ultimately lead to his departure from the post of CEO and MD of the bank, as per RBI directives, siting poor governance and compliance culture. 

Rana Kapoor, with his family and investment firms control around 10% of shares of the company, while Madhu Kapoor, his sister-in-law holds another approx. 8%. Together their combined holding stands at around 18%. 

While both Paytm and Yes Bank are struggling at their ends, the current economic scenario is also adding to the pain. If the deal goes through, Yes Bank and One97 Communications Ltd. can assist each other in achieving their independent objectives while surviving the odds.

Topics:
#YESBANK #RANAKAPOOR #PAYTM

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