Interview - Rana Kapoor - YES Bank

India's Yes Bank plans to double its staff and quadruple its branches as it prepares a $110 million share sale which it hopes to price about 44 percent above market price, the bank's founder and CEO said on Monday.

Rana Kapoor, founder and chief executive, also said that Yes Bank will look for a big foreign strategic partner, as Dutch Rabobank -- which holds 19.3 percent of Yes -- is planning to eventually set up its own business in India.

Yes Bank shares reversed an earlier loss to jump more than 9 percent on Kapoor's comments.

"Around 2010 we will look for a strategic financial partner to help with global product distribution. It is unlikely that that will be Rabobank," Kapoor told Reuters at the World Economic Forum in Singapore.

"Rabo has the desire to have its own independent banking operation in India. We do not see them as a medium to long-term partner in the bank," he said, adding that he expects Rabo's stake will gradually be diluted.

Kapoor and his founding partner Ashok Kapur together own 38 percent of Yes Bank, which was set up in August 2004 and went public in July 2005. With a market capitalisation of $1.01 billion based on Friday's close, Yes Bank is India's 15th largest bank by market value, Reuters data show.

About 43 percent of the bank's shares are in free float. Other large shareholders include Hong Kong-based private equity fund AIF Capital with 5.36 percent, Malaysian state holding company Khazanah with 4.99 percent, funds group Fidelity with 4.00 percent and reinsurer Swiss Re with 3.57 percent, Kapoor said.

Kapoor said that existing shareholders' stakes will be diluted by 6.7 percent following the issue -- in about three months -- of 20 million new shares in a $110 million private placement for one or two foreign investors.

The target price for the placement is 225 rupees ($5.50) per share, nearly 44 percent above the 156 rupees the share was trading at before Kapoor's comments.

"The issue price will be higher than the current market price. We believe that our stock is somewhat undervalued and does not fully represent the growth we are going to see," he said.

Yes Bank stock was down one percent at 156 rupees ahead of his comments and rose nearly 10 percent to 172.50 rupees in busy trading following his comments.

The equity issue is part of a $210 million capital raising in which Yes Bank will also raise tier 2 capital by issuing $100 million worth of long-term subordinated debt to German state development banks KfW and DEG.

10,000 BY 2010

Kapoor also announced a large-scale expansion of the bank's branch network as Yes Bank, now focused on corporate business and SMEs, expands into retail banking and wealth management.

He said the bank's total number of branches is set to jump from 22 in March to 60 by August and 100 by March 2008.

"We aim for 150 branches by 2010 and we have a board-approved plan to be at 400 branches by 2012."

Kapoor was equally bullish on staff numbers.

The bank has about 3,000 staff, up from 2,220 in March 2007 and 627 in March 2006.

"We expect to have 4,800 staff by March 2008. In 2010 we should be at 10,000."

Kapoor also said he expects to maintain a net profit growth rate of 60 to 75 percent in the next three years.

Analysts polled by Reuters expect profit to grow by 59 percent and 66 percent respectively over the next two years