Rana’s ‘Yes’ Bank
If nobody will lend you money, Rana Kapoor certainly will. Many an industrialist has lived for a good part of the last decade or more with this unshakeable belief.
Five years ago, the promoter of a mid-size shipping company was staring down a barrel of debt. A large private sector bank was after him for repayment and time was running out. The money involved was around Rs.3.5 billion and every bank he turned to was reluctant to help. That was understandable since talk of his company’s liquidation was already doing the rounds. A well-wisher told him that Kapoor, who was the big boss at Yes Bank, would be the person to reach out to. The businessman could not reach the banker despite making many calls but, a couple of days later, Kapoor’s office reached out to him. They wanted a meeting over dinner and the venue was to be the banker’s home at Samudra Mahal, Worli.
Kapoor was known to be a generous host, especially to his corporate guests. In fact, in late 2014, he acquired a building on Altamount Road, one of Mumbai’s best residential addresses, because his apartment seemed too tiny for these meetings. Situated right next to Mukesh Ambani’s Antilia, the banker paid Rs.1.28 billion for an apartment block that sat on third of an acre. The plan was to demolish the structure and build a bungalow.
As that evening with the shipping-company promoter progressed, there was conversation but none about business. It was a couple of hours before Kapoor brought it up with, “You need Rs.3.5 billion, to be repaid over five years”. The businessman would find it hard to believe the offer Kapoor was about to make — he could borrow Rs.5 billion over 12 years. When no banker was willing to touch him with a bargepole, here was generosity that was hard to understand. He protested gently saying he did not need that kind of money but that was shot down. With no option left, he quietly agreed.
Like most things in life, it came with a caveat. He had to pay Rs.500 million or 10% of the amount sanctioned as an upfront fee. This was not conventional banking but, given his desperation, he said ‘yes’. Kapoor would use the fee income to make his profit and loss account look better. It was tack he had repeatedly used and it was at work again. The evening and dinner were both done and, in a couple of days, the money landed in the promoter’s account. Not surprisingly, he was pleased.
Aggressively ambitious
Rana Kapoor is a bit of an oddball in banking circles. In a business often marked by some level of conservatism, he brought in an aggression that was unprecedented. Private sector banks, barring the occasional binge, choose to tread on the right side of caution. Of course, lending to sectors such as power came a cropper when coal licenses were cancelled and that landed many of them in a soup. Bruised, they slowly limped back to normalcy.
By contrast, here was a man more than happy to entertain people at home with drinks and dinner or take them to Mumbai’s racecourse or sponsor golf tournaments. He liked the limelight and could never seem to have enough of it. His rivals in the banking industry wickedly call him the ‘lender of the last resort’. That title is not entirely misplaced. In fact, it has sadly done him in. Friends are distancing themselves and Yes Bank, the institution Kapoor co-founded, is out of his grasp. Not only has he lost his job but the shares he holds in the entity are no more than 0.8% of the bank’s equity.
It was Kapoor’s bank and he ran it his way. Former officials say there were no power centres, since he decided everything
Those who have known him say the real Rana Kapoor is aggressive (abusive as well, they add gently), hyperactive and will do anything to get a deal. Equally, he knows how to get his pound of flesh and it is said very few can match his ability to get back the money he has lent. Be it folks as dodgy as Deccan Chronicle Holdings or the Vijay Mallya-promoted Kingfisher Airlines, every rupee lent came back. It left many a lender, which included large public sector banks, an embarrassed lot, as the fate of their money remained unknown. Besides, it gave Kapoor the confidence to lend larger sums to borrowers and that lack of judgment cost him dearly. Clearly, aggression worked only when the going was good.
Kapoor fancied himself as an ace corporate banker and his pedigree was the reason for that. After stints at Bank of America and ANZ Grindlays, where he was involved in loan syndication and later investment banking, he joined hands with Ashok Kapur and Harkirat Singh (from ABN Amro and Deutsche Bank, respectively) to create Rabo India Finance in 1998, which was an NBFC. The three individuals would hold 25% of the equity, with the other 75% with the Netherlands-headquartered Rabobank. In 2003, Kapoor, Kapur and Singh sold their stake, with their sights on setting up a bank.
The same year, they got the licence and, in 2004, Yes Bank was off the ground. Singh had decided to move on and it was now left to Kapoor and Kapur, who were already related since their wives were sisters. A private sector banker who knew the two says that it was Kapur’s moderate approach to banking which convinced the RBI to grant them the licence. “He was a highly respected man and known to be from the old school. Rana was brash and the complete antithesis of Ashok,” says the banker.
Responsibilities were clearly divided with Kapur being the chairman and Kapoor, its CEO, with the job of running the bank on a day to day basis. The two men, as different as chalk and cheese, managed the relationship well, until disaster struck in 2008. Kapur was killed in the Mumbai terrorist attack that year, and from then on Yes Bank became Kapoor’s fiefdom. A veteran investment banker recalls meeting him during that period and describes Kapoor as being “too sure of himself”. A proposal to work with a strategic partner from within Asia was presented and Kapoor was not too impressed. “There is nothing we can learn from them,” he said dismissively. According to the banker, Kapoor, whose Yes Bank was barely four to five years old, believed that he was next only to HDFC Bank. “It was the only bank he admired for the quality of people and was convinced that Yes Bank was not too far away. It was quite ambitious for someone who was still new,” he recalls.
During that meeting, Kapoor had made it clear that the bank was on track and it was time now to look at insurance, through a different entity outside of Yes Bank. “Rana is a good professional banker with a lot of passion. It’s just that he wanted to do too much too quickly,” adds the banker.
Continued...........