Yes Bank FPO 2020 - Pre FPO Analysis

Published on Monday, July 6, 2020 by Chittorgarh.com Team

Yes Bank is coming up with Follow on Public Offer (FPO) in this month to mobilize around Rs 15000 crores to meet its capital adequacy norms. The issue process is expected to be completed in the month of July 2020 covering listing schedules.

As known, under the Reserve Bank of India (RBI) node, State Bank of India (SBI) cornered 48.21% equity in this ailing Bank and is the major stake holder as on now. According to information, Yes Bank's current capital adequacy ratio (CAR) is around 8.5% against the minimum requirement of 12.5% (Under Basel III, a Bank's tier 1 and tier 2 CAR prescribed cap).

However, although Bank has approval for raising up to Rs 15000 cr., it has few other options like ADR (American Depository Receipts), GDR (Global Depository Receipts), QIP, Rights issue or any other mode of instruments. Thus the market is waiting for the formal announcements of the fund mobilization plans of Yes Bank. According to the merchant Banker's, Anchor investors are expected to subscribe for Rs 4500 crores if the Bank goes for the entire fund mobilization process at one shot.

As per information, Yes Bank has appointed six merchant Bankers for the proposed fundraising plans. It includes three stakeholders of the Bank i.e. SBI, Kotak Mahindra Capital, Axis Securities. Kotak Mahindra and Axis Bank hold 3.61% and 4.78% stake respectively. The other three merchant Bankers include foreign Bankers like HSBC, Bank of America and Citi Bank. According to the pull of merchant Bankers, indicative price for the proposed FPO is indicated in the range of Rs 12 - Rs 15 per share. Based on such pricing, prospective investors have the indicated a keen interest in subscribing to the issue. This pricing indicates around 40% to 54% discount to its ongoing market price trends.

Yes Bank is fully geared with all the vectors in place in a market that is likely to only grow. This Bank has had a checkered history but hoping investors will ignore the past and look to the future. The new management is confident to pull off a minimum amount or get commitments from investors before hitting the floor.

The Bank's asset quality has deteriorated with gross NPAs increasing to 16.80% in March 2020 from 3.22% a year earlier. Taking over of reins by the new management team had no impact on the sentiment of depositors as it got halved in the last seven months.

Yea Bank that is listed on BSE (code 532648) and NSE (Symbol YESBANK) has seen high/low of Rs 108.50/Rs 5.65 for the last 52 weeks. It is currently trading around Rs 26. As known the Bank floated its maiden IPO of 7 crore equity shares of Rs 10 each at Rs 45 per share in June 2005 to mobilize Rs 315 cr. and thus, it is now coming with a mega FPO after a gap of nearly 15 years. Its maiden IPO was oversubscribed by 8.27 times on the very first day of subscription. This issue was closed on 21.06.2005 and got overall 29.13 times subscription.

Will it become sweet sixteen going forward is at the center stage now. It raised further equity by way of ESOPs and QIBs till November 2019. In the month of March 2020 it issued equity worth Rs 2047 crore (at par) as private placements with SBI, Kotak Mahindra, Axis Securities etc. Its current market cap is Rs 32757 cr. and total debt is Rs 108424 cr. Current market price is at a P/BV of around 1.5. This Bank has faced controversial matters ever since it's listing in July 2005.

According to market sources, this FPO details are eagerly waited by the investors across the board. Its fancy is lying in the pricing of the issue, opined seasoned observer.