Yes Bank FPO ( Follow-on Public Offer) intends to to raise Rs 15,000 crore from the market. The price band for the issue has been fixed at Rs 12 to Rs 13 per share which is substantially lower than market price .The bank, which was bailed out by State Bank of India in March, and SBI at present holds 49% stake in the lender. Yes Bank FPO is primarily aimed to boost its capital levels in line with regulatory norms.

Yes Bank FPO Details

Issue Period15 Jult – 17 July 2020*
Face Value₹ 2/-
Issue DetailsFresh Issue of Equity Shares upto Rs.15,000 Cr
Issue Size (Rs. Cr)₹ 15,000 Cr
Price Band₹ 12 – 13
Bid Lot1,000 Equity Shares and multiple thereof
Issue Structure : 
QIB50% of the net offer 
NIB15% of the net offer
Retail35% of the net offer ( 4,316,666,667 – 3,984,615,385 Shares ) (upto ₹ 5,180 Cr)
Retail applications needed for 1x (all min)39,84,615
BRLMsAxis Capital, Kotak Mahindra Capital, SBI Capital Markets, Citigroup Global, DSP ML, HSBC Securities, ICICI Securities, Yes Securities
RegistrarKFIN Technologies Pvt. Ltd..

Updates

  • ANCHOR ISSUE: Ahead of its FPO, Yes Bank on tuesday raised ₹4,500 crore from anchor investors. These investors include US-based alternative asset manager Tilden Park Capital Management LP, Singapore-based fund management company Amansa Capital and UK-based fund management firm Jupiter Fund. Tilden Park whoch is a multi strategy fixed income focused alternative asset manager with expertise in distressed credit, has has invested over Rs 2,700 crore and has entered the Indian market for the first time. Other investors are Elara Capital, RBL Bank, Hinduja Group’s Leyland Finance, HDFC Life Insurance Company and ICICI Prudential Mutual Fund.

About Yes Bank

  • Yes bank was incorporated in 2003, and was at one stage consiodered as a new private sector bank in the country. It developed as a full-service commercial bank offering banking and technology-driven product and services.
  • The fall from grace of Yes Bank was due to several alleged irregularities in operations, potential conflicts of interest of former MD and CEO Rana Kapoor and incorrect NPA classifications.
  • Unable to rasie Funds due to bad books, Yes Bank was placed under an RBI moratorium on March 6, 2020.
  • The RBI, in consultation with the Central government superseded the board of directors. The Union government on 13 March notified the Yes Bank Reconstruction Scheme 2020. The board was reconstituted with eight professionals from the banking industry.
  • Investors including SBI, HDFC, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Bandhan Bank invested Rs 10,000 crore at a price of Rs10 per equity share.
  • SBI now owns 49 per cent of the bank and is required to hold at least 26% of the equity for next three years.
  • The Bank has a network of 1,135 branches and 1,423 ATMs.

Yes Bank: Financials

Item/ Rs. In CroreFY20FY19FY18
Deposits1,05,311.172,27,557.902,00,688.60
Deposits Growth (%)-53.72%13.39%
Borrowings1,13,790.501,08,424.1174,893.58
Borrowings Growth (%)4.95%44.77%
Interest Earned26,052.0229,623.8020,268.60
Interest Earned Growth (%)-12.06%46.16%
Net Profit/Loss for the year-16,432.581,709.274,233.22
Net Profit as % to revenue-63.08%5.77%20.89%
Net Interest Margin (%)2.30%2.97%3.39%
Gross NPA (%)16.80%3.22%1.28%
Net NPA (%)5.03%1.86%0.64%
Share Capital2,510.09463.01460.59
Reserves as stated19,184.8726,424.4025,291.91
Net worth21,694.9626,887.4125,752.51
FV  (Rs.)2  
EPS (₹) -56.117.418.46
RoNW (%)-81.94%6.49%17.72%
Net Asset Value (₹)17.29116.14111.82

Salient Points

  • The relativly low price being offered for Yes Bank shares at first sight seems attractive but in reality the price after the FPO will be almost determined afresh. The reconstruction scheme had locked in 75% of all shares for 3 years, held by existing shareholders and there is considerable equity dilution.
  • The Bank posted a net loss of Rs 16433 crore in FY2020 due to heightened slippages and the consequent provisioning.
  • FPO is being resorted as spurt in NPAs and consequent provisioning had led to Yes Bank breaching the capital adequacy requirements mandated by RBI. As on end March 2020, Tier 1 capital ratio for Yes Bank was 6.5 per cent, which is below the RBI requirements of 8.875 %.
  • For the 4th quarter 2019-20, Yes Bank reported a net profit of Rs 2,629 crore after it wrote down additional tier-1 (AT-1) bonds as part of its reconstruction scheme. Excluding the write-down, the bank would have posted a loss of Rs 3,668 crore for the the quarter., as against a loss of Rs 1,507 crore in the same period of last year.
  • Earlier Yes Bank had reported a loss of Rs 18,560 crore in the Dec quarter when it made provision of Rs 15,422 crore against NPAs.
  • Yes Bank’s gross NPAs were at Rs 32,878 crore (16.80 % of advances) this March as against 3.20 per cent in March 2019 and 18.87 per cent in December 2019.
  • Yes Bank has three wholly owned subsidiaries are Yes Securities, Yes Asset Management (Yamil) and YES Trustee (YTL). Yes Securities undertakes merchant banking, investment banking, institutional sales and trading and equity research.

Yes Bank FPO: Assessment

  • The size of FPO is quite high. It is very unlikely that the issue would get subscribed much. Thus, chances of allotment are very high and post FPO at least the likely demand is not certain unless some big investors take interest.
  • While Yes Bank could attract some good investors, it was mainly a foreign fund specializing in distressed assets that led to subscription of anchor investor portion. Mutual Funds didinot participate in the anchor portion. Before the reoganisation plan, Yes Bank repreadly failed to raise capital which finally led to is precaious financial position forcing RBI to act.
  • The moratorium few months back imposed by the RBI, coupled with writing off AT-1 bonds has left deep scars on investors and has led to consoderable loss of reputation whoich may take time to get back.
  • As a result there has been considerable withdrawl of Fixed deposits by custiomers which may take time to build up again.
  • SBI currenly hold just a notch below the 50% holding mark. If more govt companies join in , will the bank be able to keep its tag of a private sector bank. .
  • At present book value (BV) is Rs 17.3. Post this FPO, BV will be Rs 14.6 at the lower price end of Rs 12 and Rs 15.2 at the upper price end of Rs 13. The post-issue adjusted BV is Rs 11.2 and Rs. 11.7 at the issue price of Rs 12 and Rs. 13 respectivey. Thus P/BV and P/adjusted BV (ABV) works out to 0.86 and 1.1. Among comparable banks, IDFC First Bank is commanding P/ABV of 0.9 times and Federal Bank at P/ABV of 0.8 times.
  • The institutions which invested as part of reorganisation plan, invested at Rs 10 in March 2020.
  • The current market price of Yes Bank is not the true reflection of fundamentals and is due to shortage of scrips.
  • On the positive side many international players have been showing some intrest in stressed assets in the country.
  • The Listing of Yes Bank will be less determined by fundamentals and more by the interest that institutions other than Govt show in the issue. In the past Yest Bank has failed on this count. Even a reasonable interest can lead to positive impact on the stock price.
  • I have not yet decided to apply for this issue and will be monitoring the issue response and look for QIB response till 2nd day & if needed till noon of Day 3 and only apply more than the minimum application if some good signs are visible.
  • As far as an application for minimum amount in Yes bank, there is not much risk and I may apply for the same if the response by QIBs to the issue is even just ok. The risk increases when one if going for larger application in retail due to large allotment.
  • The Yes Bank FPO at this stage does not look to be a fully clear case. This view will be negated if it can garner funds from some institiutions other than Govt owned institutions.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.