Yes Bank’s Rs 15,000 crore FPO subscribed 93% on final day; QIB lead bidding

A large number of financial institutions have been gearing up to raise capital in the recent weeks.

Private sector lender Yes Bank’s Rs 15,000 crore follow-on public offer (FPO)  saw subscription surge to 93% on the last of bidding as Qualified Institutional Buyers (QIB) arrived on the scene. According to all exchange demand graph, Yes Bank’s FPO received 8,47,86,84,000 bids against 9,09,97,66,899 shares that were on offer, according to the data provided by NSE. Yes Bank, along with other private and public lenders is trying to raise capital to tide through the fallout of the coronavirus pandemic. 

Yes Bank has received 455 crore bids for 275 crore shares from qualified institutional buyers, according to data on BSE. Domestic Financial Institutions were leading the bidding among QIBs. Retail investors, non-institutional investors, and employees of the bank had not fully subscribed their portion so far. The price bank of Rs 12-13 per share for the FPO is at a significant discount to the trading price of the stock.

“Our concern for Yes Bank is fresh formation of bad loans that would keep provision high and return ratio compressed for a longer time,” said  Jaikishan Parmar,  Sr, Equity Research Analyst, Angel Broking in a note.  He added that retail deposit is the key for any bank for lower cost of funds; however, Yes Bank has witnessed sizable deposit erosion over the last 2 quarters. Angel Broking was neutral on the Yes Bank FPO. Ahead of the issue, the private sector lender raised Rs 4,100 crore from anchor investors, which included leading fund houses. 

Brokerage firm Nirmal Bang had asked investors to avoid the FPO. “We recommend AVOID rating to the FPO. While we agree that the issue is priced cheaply, the valuation should be seen in context of the uncertainties, the likely stress and overall (poor) financial performance that is expected in the foreseeable future. We would be more comfortable getting into the stock once we have more clarity on the numbers and the future trajectory,” the brokerage said in a note. 

A large number of financial institutions have been gearing up to raise capital in the recent weeks, S&P Global Ratings said that it believes that large capital increases across India’s financial institutions support the system’s stability during these rocky times. Banks that have expressed an intention to raise equity include ICICI Bank, Axis Bank, Yes Bank Ltd, State Bank of India, Bank of Baroda, and Punjab National Bank. Others that have recently issued large amounts of capital include Kotak Mahindra Bank and IDFC First Bank.