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The Altico mess and pain for Yes Bank

Altico Capital's default could put more pressure on the bank's balance sheet and lead to greater scrutiny

Salil Panchal
Published: Sep 24, 2019 12:00:00 PM IST
Updated: Sep 25, 2019 01:47:22 PM IST

The Altico mess and pain for Yes BankImage: Francis Mascarenhas / Reuters

Bad news surrounding Yes Bank doesn’t seem to stop. In September, the default of unlisted NBFC Altico Capital for ₹19.97 crore of interest income on an external commercial borrowing of ₹340 crore from UAE-based Mashreq Bank led to a ratings downgrade by various agencies. According to an India Ratings note, Yes Bank has a ₹450 crore exposure to Altico.

Several other banks—including State Bank of India (₹363 crore), HDFC Bank (₹280 crore); Bank of Baroda (Rs 278 crore) also have an exposure to Altico. Mashreq Bank has the highest exposure for a total of Rs 660 crore.

But this is not the first time that Yes Bank has come into the limelight for its exposure to companies which were fraud-hit such as CG Power or to debt-laden companies such as DHFL and full carrier Jet Airways, which shut operations in April.

Yes Bank, in its latest investor presentation ended June 30, 2019, said that net non-performing assets stood at 2.91 percent at ₹6,883 crore. Gross slippages were for ₹6,200 crore in the same quarter, where net corporate slippages were entirely from the accounts classified as BB and below at end of March 2019.

The bank has a contingent provision of around ₹700 crore as on June 30, 2019, which continue to impact earnings.

The Altico mess and pain for Yes Bank
But investors have been ruthless on the Yes Bank stock—falling 80 percent to ₹55.90 at the BSE on September 25, from a high of ₹280 in April this year. Concerns over corporate governance and exposure to the commercial real estate which continues to slow down and impact in asset quality are hurting the bank.

In an unrelated development, Yes Bank founder Rana Kapoor is considering selling stakes of his family-owned stakes in Yes Bank to Paytm, in a bid to repay dues. There are reports that Kapoor is in talks with Paytm founder Vijay Shekhar Sharma, who also controls the Paytm Payments Bank; RBI norms say that a promoter cannot control two banks.

This deal is unlikely to go through, which automatically means that the scrutiny on Kapoor and Yes Bank is unlikely to diminish.

As far as Altico is concerned, the company has sought more time from lenders and investors to devise a plan to meet its debt obligations. The initial plan of the NBFC was to sell some assets which would help it to infuse fresh funds from new shareholders.

Altico’s chairperson Naina Lal Kidwai, who had 14 committee and board meetings over the past 60 days, has quit from her post, citing “the burden impossible to keep up”.

“It is apparent that either Altico’s strategy of concentrated lending to high-risk real estate developers had the board’s full support or they were ignorant of it,” says Hemindra Hazari, an independent banking analyst who publishes his writings on Singapore-based research platform Smartkarma.

Hazari says the lesson from Altico's default is loud and clear: Companies’ financial accounts and the senior management commentary maybe misleading and excessively optimistic.

This could put more pressure on Yes Bank’s balance sheet. It also indicates the incompetence of credit ratings agencies.

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  • Rajesh

    I really don\'t understand even after clarification from yes bank that it has no exposure into Altico, the intent and understanding of the author vid a vid related to 450cr exposure to Altico by Yes bank. Would highly appreciate if he can clarify on it.

    on Sep 24, 2019
  • Rajesh

    Also the author remember an Indian rating report but not the management clarification.

    on Sep 24, 2019
  • Vimal Vaswani

    When all bad news will be resolved. How much it will take time to recover the stock

    on Sep 24, 2019
  • Vamsi Mohan

    When time is not good every thing is a bad loan. If there is no loan how will business survive?

    on Sep 24, 2019
  • Vishu

    Most of the adverse reports against Yes Bank like the one above or the recent report by Deccan Herald are being carried out by people who lack morality or self-respect. Their concerted actions are being carried out to precipitate a situation where RBI will opine to merge Yes Bank with one of these opinion pushers choices such as Kotak Bank, etc. All these unethical people together hate Mr Gill, CEO of Yes Bank who has taken the onus of putting the lender on tracks and save the investors. Unfortunately, SEBI is continuing to be a mute spectator....this is what a common man understands by what ever is happening with Yes Bank.

    on Sep 24, 2019
  • Sukmoney

    Saying All\' is well !, will not be able to make commitment to investors for their investment

    on Sep 25, 2019
  • Venkat

    Still how long this negative news propaganda continue? Hope some media and opponents are after committed to finish this organisation and throw all employees and share holders on street

    on Sep 25, 2019

    What is status of Altico capital a/c for the QTR ending on 30/9 in YB . If it is standard WITH SERVICING OF INTEREST then there is no problem.

    on Sep 25, 2019
  • S G

    Some people are highly eager to discovet bad news about yb so that they can short this stock to . However most of the banks are in the same problems but there performance on market is quite ok. Only yb is under gilotin.

    on Sep 25, 2019
  • Dr Vinod Sethi

    Despite all bad news, depositors have still faith in yes bank and its new management. The shares are being manipulated by operators, to make money. But it is videly believed by most sharrholders that it would recover back and would achieve its past heights. Moreover, if you look at small inverstors their number is increasing. Even its deposits are also on rise.

    on Sep 25, 2019