In order to boost its capital levels in line with regulatory norms, Yes Bank is launching its Follow-on Public Offer (FPO) 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 of Rs 25.60 at close at the National Stock Exchange Friday.
The discount is likely to make the offer attractive for new investors, making capital raising easier for the lender and reducing the burden on the consortium of banks to infuse further capital. A State Bank of India-led consortium of banks infused nearly Rs 10,000 crore in Yes Bank in March in a reconstruction plan approved by the Reserve Bank of India.
Last Wednesday, SBI, the largest shareholder in Yes Bank, approved further investment of up to Rs 1760 crore in Yes Bank. The bank was placed under a moratorium by the RBI in March and a new management and board were appointed.
What are the issue details?
The FPO opens for anchor investors on July 14. For all other investors, the offer period is July 15-17. The lender has kept retail portion for investment at a minimum of 35 per cent of the offer size, while for non-institutional investors a minimum of 15 per cent of shares have been reserved. Qualified institutional buyers (QIB) can buy up to 50 per cent of the total issue size.
A maximum of Rs 200 crore worth of shares have been reserved for Yes Bank employees, who will also get a discount of Rs 1 per share. An investor needs to bid for a minimum of 1000 shares and in lots of similar quantity for higher subscription. Yes Bank chose the FPO route as it offers freedom in pricing the issue, as compared a Qualified Institutional Placement (QIP) route that requires pricing around recent market prices as per a SEBI formula.
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What about Yes Bank’s capital levels and profitability?
Spurt in NPAs and consequent provisioning has led to Yes Bank breaching the capital adequacy requirements as mandated by the Reserve Bank of India. At March-end 2020, Tier 1 capital ratio for the bank was 6.5 per cent, much below the RBI requirements of 8.875 per cent, necessitating the fund raising plan. Yes Bank reported a net profit of Rs 2,629 crore after the private lender wrote down additional tier-1 bonds as part of its reconstruction scheme. Excluding the write-down, the bank has posted a loss of Rs 3,668 crore for the fourth quarter ended March 2020, as against a loss of Rs 1,507 crore in the same period of last year.
The bank had reported a record loss of Rs 18,560 crore in the December quarter, as it made provision of Rs 15,422 crore during the quarter against NPAs. The bank’s gross NPAs were at Rs 32,878 crore (16.80 per cent of advances) this March as against 3.20 per cent in March 2019 and 18.87 per cent in December 2019.
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