Private sector lender Yes Bank is expecting to finalise partners for setting up an asset reconstruction company (ARC) within 60 days, its top executive said.

The bank, which is on the revival path after sinking due to malpractices in lending by the earlier management led by promoter Rana Kapoor, will transfer all its bad loans to the ARC.The soured loans to move out to the ARC are in the retail, corporate and micro, small & medium enterprises (MSME) books. 

After this structuring is done, Yes Bank will have no non-performing asset, its managing director and CEO Prashant Kumar said in a concall with media after announcing the second quarter results.

Talks are on with the investors and 12 have shown interest in setting up the ARC, which will have Yes Bank as the minority partner. The list includes Brookfield Asset Management, Oaktree Capital Management, JC Flower, Ares SSG, CarVal Investors, Apollo Global Management, Varde Partners, Bain Capital’s India Resurgent Fund, Avenue Asia Group,  Rohatyn Group and Silver Point Capital.

On recovery from Dish TV, Kumar said Yes Bank is looking to take the legal route against the direct-to-home (DTH) operator. 

Yes Bank, which is the largest shareholder in Dish TV with 25.63% stake, is pressing for the DTH company to hold a special shareholders meeting to reconstitute the board. It has sought to remove the entire board of directors led by Jawahar Goel on grounds of corporate governance and is also opposing the proposed Rs 1,000-crore rights issue by the Subhash Chandra led Essel group firm.

Countering this, Dish TV has rejected Yes Bank’s EGM requisition notice on the technical ground that it requires certain prior approvals. On the issue of change in directorship, Dish TV had said that this requires prior approval of the Ministry of Broadcasting.

Dish TV promoters led by Goel own only 6%. Yes Bank had lent Rs 3,000 crore to Essel group promoters and on default, invoked the pledged shares in May last year.    

Meanwhile, Yes Bank has reported fiscal second quarter net profit of Rs 225.50 crore, up 74% from the earlier year, as the asset quality improved and advances, particularly on the high-yielding unsecured loans, grew. A year ago, the bank had reported net profit of Rs 129.37 crore.

 “The results are being announced in the backdrop of the gradual opening up of the economy and normalisation, which is showing up in the improved credit growth, lower accretion of bad loans and a healthy improvement in the CASA,” Kumar said, adding that the bank made a prudent provisioning of Rs 336 crore on a single telecom exposure during the quarter.

Recoveries of Rs 980 crore and upgrades of Rs 969 crore boosted the profitability of the bank, Kumar said.

The lender’s net interest income (NII) in the quarter ended September fell 23.4% to Rs 1,512 crore from Rs 1,973 crore a year ago. 

Asset quality improved in the quarter with gross non-performing assets (NPA) ratio falling to 14.97% of its advances, from 15.6% in the previous quarter. Net NPA ratio stood at 5.5% versus 5.8% a quarter ago.

The restructured book expanded 24% to Rs 6,184 crore. Overdue book, loans on which payments are due for more than 30 days but less than 90 days, declined Rs 6,000 crore sequentially. 

Fresh slippages at Rs 1,783 crore were also lower over the previous quarter. Of this, corporate slippages were at Rs 750 crore at the end of September compared to Rs 1,258 crore in the previous quarter. 

Stress increased in the fiscal second quarter on account of higher restructuring of MSME loans and the second wave of Covid-19. “Addition of bad loans in the retail and MSME sector were Rs 1,000 crore. We do not expect more than Rs 600 crore of NPA from these segments in the coming quarter," Kumar said.

Provisioning fell to Rs 377.37 crore at the end of September quarter compared to Rs 457.03 crore a quarter ago. 

The healthy growth in the current account savings account (CASA) of about 200 basis points helped the bank to keep the costs down. CASA ratio increased to 29.4% from 27.4%.  Deposits grew 30% year-on-year.

The bank’s retail mix in total loan disbursements improved 100 basis points sequentially to 55%. Advances grew 3.5% year-on-year and 5.6% on a sequential basis.