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banking story YES BANK.

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Saying YES
to Innovation
India's youngest greenfield bank has aggressive growth plans, both
in corporate and retail banking. Yes Bank, which has state-of-the-art
technology and a highly skilled workforce, aims to be different from
other Indian banks, writes N.B. Rao

NDIA'S banking sector may appear seas mergers and acquisitions (M&A) deals Bloomberg, recently ranked Yes Bank No 1
crowded, with nationalised banks, old on behalf of its Indian clients. Its invest- in the M&A Outbound cross-border trans-
and new private sector banks, interna- ment bankers helped stitch up the second- actions category, and No 5 in the M&A
tional majors, and even cooperative largest Indian cross-border acquisition, "overall" category.
banks jostling for market share in an when Pune-based Suzlon, the world's fifth "We have 20 professionals in our cross-
increasingly competitive sector. But the largest wind turbine maker acquired border M&A banking team, and we see ter-
country's youngest bank — and the first Belgium-based Hansen Transmissions rific potential in this business," says
greenfield one to be set up in 12 years — International NV, the world's second Kapoor, a veteran banker with more than
is gung-ho about the future. It is already largest wind turbine gearbox maker, for 25 years' experience, both in India and
drawing up ambitious expansion plans, not $560 million. abroad.
just at home but also internationally. The other major overseas M&A deal it The focus of its corporate division,
Yes Bank began operations in August was involved in this year was on behalf of explains the Yes Bank CEO, is on knowl-
2004. It had a successful Initial Public United Phosphorous, which acquired edge-driven banking, which will be the key
Offering (IPO) in June 2005, when its issue Advanta Netherlands Holding BV for differentiator from others in the industry.
was oversubscribed about 25 times. almost $120 million. Leading international He envisages the bank in the role of a
Today, it has managed to carve a niche for financial data and news provider, 'money doctor' for its domestic and inter-
itself in areas like cross-border deals and
currency strategies.
Says Rana Kapoor, founder of the bank,
and its managing director and CEO: "Our
total assets have already topped the $1 bil-
lion mark. Our balance-sheet will double
every year over the next two to three
years." The bank has about 30 branches at
present; it plans to have 100 branches by
March 2008, and between 200 and 250
branches two years later.
Yes Bank — Yes is not an acronym for
Yen-Euro-$, insists Kapoor — focuses on
three distinct segments: corporate and
institutional banking, business and transac-
tional banking, and retail banking and
wealth management.
The wholesale (corporate and institu-
tional) banking division made waves this
year when it spearheaded two major over-
RANA KAPOOR: Playing the role of ‘money doctor’

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RETAIL FOCUS: Creating a delightful experience

national clients, pursuing a diagnostic can stand up to the vagaries of economic

approach, with strong emphasis on prog- Full convertibility ups and downs," notes Kapoor. And when
nosis and prescriptions. full convertibility happens, he wants to
The bank has built up specialised will send out a position Yes Bank as a leading, cutting-
domain knowledge and understanding in edge, rupee house, able to deal with other
some key sectors, including food and strong economic global currency firms.
agribusiness, life-sciences, telecommunica- With Indians spread across the globe,
tions, media and technology, infrastruc- signal that we as a Kapoor sees tremendous potential for dol-
ture, and select manufacturing industries
including textiles. Kapoor points out that
nation can stand lar-rupee, euro-rupee and yen-rupee trans-
actions. He also expects the Indian rupee
the bank has recruited 'technocrat
bankers' — with engineering and MBA
up to the vagaries to emerge among the leading traded cur-
backgrounds — who can offer in-depth of economic ups In the corporate finance segment,
insights into these sectors to its clients. Kapoor says Yes Bank's strengths are in
The bank has also invested consider- and downs. structured lending programmes, longterm
ably in its treasury practise and aims to ulti- funding for infrastructure projects, funding
mately emerge as a rupee bank. Kapoor of acquisitions, and financial restructuring.
believes that the rupee will become fully roadmap for full convertibility, after Prime The bank is also looking at distressed com-
convertible on the capital account in about Minister Manmohan Singh asked it to revis- panies.
two years. The Reserve Bank of India, the it the issue. One sure-fire segment of the corporate
country's central bank, has already "This (full convertibility) will send out a world, offering tremendous potential for
appointed a committee to chalk out a strong economic signal that we as a nation growth, is "Emerging Indian companies".

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THE ART OF ACQUISITIONS Kapoor describes these as companies in

the $10-100 million (turnover) bracket,
buyers in India, conducts negotiations with high-octane growth and energy.
on their behalf, and carries the entire "They represent the winners of the future,"
process through. he explains. "There are several companies,
Cross-border acquisitions are novel to recording growth of 50-70 per cent annu-
the Indian corporate sector (and also to ally, who are transforming their manage-
the banking industry). Until recently, ment make-up and putting in place superi-
only top business groups and large IT or governance structures."
and pharmaceutical companies had the Yes Bank hopes to play the role of
appetite for such deals. But things have 'money doctor,' providing a 360-degree
changed today, and even mid-sized approach, thanks to its domain knowledge
firms are looking at overseas acquisi- and expertise in specific fields. Many of
tions. these mid-size companies have overseas
But unlike the major players, many of expansion ambitions, and Yes Bank will be
the others do not have an international there to help them in acquiring other firms,
management cadre, and have to depend or setting up overseas operations.
on investment bankers. "In India, own- The bank will of course also be catering
ers of companies are closely involved to large companies (with turnover exceed-
with these deals, unlike in the developed ing $100 million), and small and medium
ADITYA SANGHI: country head
(investment banking) Yes Bank world where professional managers con- enterprises (in the $1 million to $10 million
duct negotiations," says Sanghi, bracket).
ADITYA Sanghi is just 34. In his short explaining the differences in the M&A Many of the new private sector banks
career of 12 years, he has seen the evo- culture in India and abroad. that have come up over the past 10 years
lution of the mergers and acquisitions Investment bankers in India also have to have focussed on the retail sector. Yes
(M&A) business in India. do due diligence and thoroughly go over Bank too aims to tap this lucrative seg-
When Sanghi, an alumnus of St various documents, as in international ment, but its retail focus will be on owners
Stephen's College, Delhi, and the Indian acquisitions there are no indemnities of tiny businesses and firms in the unor-
Institute of Management, Bangalore, got and protection against later claims. In ganised sector, and affluent individuals,
into investment banking in the early India, a buyer is protected by law, but with incomes exceeding $10,000 annually.
1990s, there were very few Indian com- most international deals are done on an There are about 12 million households
panies that had the capability, the fund- 'as is where is basis', explains Sanghi. in this category in India. Some can be
ing, or even the inclination to acquire a Does he see growing competition for found outside the metros and large cities
foreign firm. Indian investment bankers from rivals in and state capitals. There is growing afflu-
There was also a plethora of govern- Europe and the US? Sanghi believes that ence in smaller cities, places like Bhiwadi in
ment regulations that made it highly the current size of overseas acquisitions Rajasthan, Surat and Rajkot in Gujarat,
improbable for an Indian business group - a majority is in the sub-$1 billion cate- Nashik and Nagpur in Maharashtra,
to even consider acquiring a foreign gory - does not interest most of the big Vishakapatnam and Vijaywada in Andhra
entity. But things have changed dramat- international players. Of course, some Pradesh, Hubli in Karnataka, Tirupur in
ically since then. have taken up deals on behalf of a few Tamil Nadu, and Goa. Yes Bank will help
As country head (investment banking) top Indian pharmaceutical companies. the well heeled in these places analyse
at Yes Bank, Sanghi has spearheaded But by and large, most Indian companies their financial needs and provide solutions,
several cross-border acquisitions on going in for a foreign acquisition prefer taking into account their risk profiles.
behalf of his Indian clients. "We have Indian investment bankers. Kapoor believes that despite the grow-
done close to $800 million of cross-bor- Sanghi, who worked with KPMG ing emphasis on the retail sector, there is
der acquisitions for our clients over the Corporate Finance, Lazard India and vast room for improvement in service stan-
past year," he remarks. They include the Rabo India Finance before joining Yes dards. The bank, which has entered into
$560 million acquisition of a Belgian Bank, has to his credit several promi- alliances with best-of-breed technology
firm for Suzlon, and a $120 million nent transactions, including the acquisi- partners — and has won awards from AC
acquisition of a Dutch company for tion of the Tetley group by Tata Nielsen (for Technology Innovation) and
United Phosphorous. Tea in 2000. Earlier, most of his deals the National Association of Software and
Sanghi, who travels abroad extensively, related to the acquisition of Indian com- Service Companies (for IT innovations in
says the bank is now well networked in panies by international firms. But these Emerging India) — aims "to create a
about 30 to 40 international markets, days, Sanghi is increasingly seeing a delightful experience" for its customers,
and accesses a lot of information about reversal of roles, with Indian entrepre- and fill "the missing link" in the Indian
firms that are on the block. It then pass- neurs aggressively buying companies banking sector.
es this information on to prospective abroad. The bank also offers wealth manage-
ment services to both resident high net

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NEW GENERATION BANK: Yes Bank hopes to emerge as a global player

worth individuals and for 'global Indians'. Yes Bank also has ambitious diversifica-
Kapoor says that besides expanding its
domestic network, the bank plans to open
With a critical tion plans, including a foray into retail
broking, the setting up of a mutual fund,
representative offices in at least two geog- mass of Indian and also an insurance venture — the last
raphies within a year — in Singapore, to probably with an international partner. "We
cater to South East Asia, and in West Asia, companies also have aspirations of setting up a tech-
most likely in Dubai, to address the strong nology outsourcing subsidiary, and a
non-resident Indian (NRI) market. expanding micro-finance institution," notes Kapoor.
The real foreign thrust will be later. Yes Though the bank's key team helps
Bank does hope to emerge as a global bank overseas, there other companies to acquire firms abroad,
— with a strong presence in countries with
a significant ethnic Indian population. But
is need for Kapoor says it has no plans to acquire
banks or merge itself with other institu-
in its first phase of expansion (till 2010) it
will predominantly focus on building a
advisory services tions. He sees organic growth ahead, and
does not want to dilute the bank's quality
strong home-country bank. Kapoor from banks. systems by acquiring other banks.
believes that with a critical mass of Indian As with many new generation banks,
companies expanding overseas into Europe Yes Bank has significant fee-based activity.
and South East Asia, there is strong need investors including CVC Citigroup, The bank also has the ability to effectively
for advisory services from Indian banks, AIF Capital and ChrysCapital. manage its capital, and follows prudent
and a very compelling case for their over- The Indian promoters have a 39 per risk management systems.
seas presence. cent stake in the bank, Rabobank has 20 The bank's mantra is to say 'yes' to
Yes Bank was promoted by Rana per cent, and foreign institutional investors offering innovative financial solutions, to
Kapoor and Ashok Kapur — the non-exec- about 18 per cent. Kapoor says that there adopting international best practices, to
utive chairman of the bank — with the could be a further dilution in the promoters' providing high standards of service, and to
financial support of Rabobank Nederland, equity stake, to meet the growing capital transparency in its operations. It needs all
and global private equity institutional requirements. that for a minnow to make its mark.