JOIN USYES Bank’s follow-on public offer document highlights uncertainties
Embattled private sector lender YES Bank, which was bailed out in March 2020, has highlighted a lot of uncertainties in its operations in the coming days. The bank’s follow-on public offer (FPO) to raise Rs 15,000 crore is opening on July 15 and close on July 17.
In its Red Herring prospectus, the Bank has raised concerns regarding two key areas -- deposit base and capital base -- for the future that had previously led to its emergency bailout in March. The bank has fixed the floor price at Rs 12 per share.
Under risk factors, the bank says, “There can be no assurance that the number of deposits with the Bank will increase or even remain at comparable levels in future.” In a span of just 7 months the bank’s deposit base has more than halved to Rs 1.03 lakh crore on May 2, 2020, from Rs 2.24 lakh crore on September 30, 2019.
The run on the bank, which had started in full flow in October 2019, forced RBI to place the bank under the moratorium, in a sudden move on March 5.
On capital raising, it says: “There can also be no assurance that we will be able to raise adequate additional capital in the future on terms favourable to us, or at all, and this may hamper our growth plans (apart from those that can be funded by internal accruals) and adversely impact our financial ratios.”
The bank’s capital adequacy ratio decreased from 18.4% as of March 31, 2018 to 16.5% as of March 31, 2019, and to 8.5% as of March 31, 2020, due to higher provisioning requirements.
“Given the nature of the targeted borrowers, Retail Banking and Medium, Small and Micro Enterprises advances may carry a higher risk of delinquency if there is a prolonged recession or a sharp rise in interest rates. As a result, we may be required to increase our provision for defaulted advances,” it said about the NPA situation, raising further concerns.
The Bank’s gross NPA increased to Rs 32,877.6 crore in the fiscal year 2020 from Rs 7,882.6 crore for the fiscal year 2019. While the bank declined to comment over the issue, the analysts say that SBI’s back-up will help it go through the FPO. “Anywhere else in the world this is an SBI subsidiary,” an analyst said.
What is on offer?
The bank will be making an offer through the book-building process, for shares of the face value of Rs 2 each from July 15 to July 17 for normal investors, while July 14 is the date set for the anchor investors.
Up to 50% of the Net Offer shall be available for allocation on a proportionate basis to Qualified Institutional Buyers (QIBs), provided that the Bank may allocate up to 60% of the QIB portion to Anchor Investors on a discretionary basis. One-third of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to valid bids being received from the domestic Mutual Funds at or above the Anchor Investor Allocation Price.
Sources in the know told DH that one of the anchor investors is global stressed asset fund Tilden Park, which was at the advanced level of investing $500 million in YES Bank before RBI decided that wasn’t enough to save the bank.
Another 5% of the QIB Portion (excluding the Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all QIB Bidders (other than Anchor Investors), including Mutual Funds.
Further, not less than 15% of the Net Offer shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Net Offer shall be available for allocation to Retail Individual Bidders.