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Private sector lender YES Bank is all set to hit the primary market with its follow-on public offering (FPO) worth Rs 15,000 crore. The floor price of FPO has been fixed at Rs 12 a share, almost half of the current market price.
The significant discount to current market price may have made the FPO a mouth-watering proposition for many investors, but the unlisted market is signalling otherwise. Premium for the upcoming FPO currently stands at Rs 0.70-0.75, merely 5-6 per cent of floor price.
The premium halved from Rs 1.15-1.25 after the lender declared the floor price. Dealers in the unlisted market cited various reasons for the issue getting poor response in this unofficial market.
"The size of FPO is significant. It is very unlikely that the issue would get subscribed multiple times. Thus, chances of allotment are very high. Investors are reluctant to buy this at a premium," said Dinesh Gupta of Investor Zone.
Dealers expect the issue to sail through easily, considering the robust liquidity pushed through central banks and new-age Robinhood investors lapping up cheaper stocks.
"Since it is an FPO, there is no price discovery involved, and chances of listing gains are limited. Investors are aware of the risk-reward. This limits investor response to the issue,” Gupta said.
YES Bank had been placed under an RBI moratorium on March 6, 2020, but came out of it on March 18, after the crisis-ridden private bank came out with a reconstruction scheme. Investors including SBI, HDFC, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Bandhan Bank came to the aid of the midcap lender and invested Rs 10,000 crore. SBI now owns 49 per cent of the bank.
However, shares of existing investors got locked in for three years under the reconstruction scheme. Market watchers say this FPO will increase liquidity of the stock in the market.
Most domestic lenders are raising capital from the market anticipating an impact of the coronavirus crisis on their loan books. The three-month EMI moratorium is likely to build pressure on their loan books.
Abhay Doshi, an independent broker of unlisted shares, said all lenders are raising fresh capital due to COVID-19. "FPO is the best possible route for Yes Bank, as it wants to raise a huge amount," he said.
"The bank’s loan books are not in very good shape, but we expect the worst to be over soon. If NPA does not surge rapidly, it can be a decent bet,” he said. "The premium in the off-market trade is mainly active due to bulk quantity buyers,” he said.
The significant discount to current market price may have made the FPO a mouth-watering proposition for many investors, but the unlisted market is signalling otherwise. Premium for the upcoming FPO currently stands at Rs 0.70-0.75, merely 5-6 per cent of floor price.
The premium halved from Rs 1.15-1.25 after the lender declared the floor price. Dealers in the unlisted market cited various reasons for the issue getting poor response in this unofficial market.
"The size of FPO is significant. It is very unlikely that the issue would get subscribed multiple times. Thus, chances of allotment are very high. Investors are reluctant to buy this at a premium," said Dinesh Gupta of Investor Zone.
Dealers expect the issue to sail through easily, considering the robust liquidity pushed through central banks and new-age Robinhood investors lapping up cheaper stocks.
"Since it is an FPO, there is no price discovery involved, and chances of listing gains are limited. Investors are aware of the risk-reward. This limits investor response to the issue,” Gupta said.
YES Bank had been placed under an RBI moratorium on March 6, 2020, but came out of it on March 18, after the crisis-ridden private bank came out with a reconstruction scheme. Investors including SBI, HDFC, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Bandhan Bank came to the aid of the midcap lender and invested Rs 10,000 crore. SBI now owns 49 per cent of the bank.
However, shares of existing investors got locked in for three years under the reconstruction scheme. Market watchers say this FPO will increase liquidity of the stock in the market.
Most domestic lenders are raising capital from the market anticipating an impact of the coronavirus crisis on their loan books. The three-month EMI moratorium is likely to build pressure on their loan books.
Abhay Doshi, an independent broker of unlisted shares, said all lenders are raising fresh capital due to COVID-19. "FPO is the best possible route for Yes Bank, as it wants to raise a huge amount," he said.
"The bank’s loan books are not in very good shape, but we expect the worst to be over soon. If NPA does not surge rapidly, it can be a decent bet,” he said. "The premium in the off-market trade is mainly active due to bulk quantity buyers,” he said.
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