Yes Bank’s Rs 15,000 crore FPO opens; analysts warn against fresh investment

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Published: July 15, 2020 11:55 AM

Foreign brokerage Macquarie maintained an 'underperform' rating to the Yes Bank stock with a target price of Rs 8 apiece, a downside of 62 per cent from yesterday's close

Yes Bank fpo subscription, yes bank share price, yes bankAll 14 anchor investors placed their bids for 341 crore equity shares at the lower end of the price band of Rs 12-13 per share

Yes Bank share price jumped 5 per cent to Rs 22 apiece on BSE, a day after the private lender raised Rs 4,500 crore from anchor investors. FPIs (foreign portfolio investors), along with several other investors have been allocated shares at Rs 12 per equity in the anchor portion, PTI reported citing investment banking sources. All 14 anchor investors placed their bids for 341 crore equity shares at the lower end of the price band of Rs 12-13 per share. According to a regulatory filing, Bay Tree India Holdings 1 was the largest anchor investor. It invested Rs 2,250 crore in Yes Bank for an allocation of 187.5 crore shares, subscribing 54.90 per cent of the anchor investor portion.

Yes Bank’s Rs 15,000 crore follow-on public offer (FPO) has opened for subscription today. The issue will close on July 17, 2020. “We believe the current market price of Yes Bank is not the true reflection of fundamentals given that the reconstruction scheme had locked in 75% of all shares for 3 years, held by existing shareholders and new investors entering via the scheme,” Jaikishan Parmar, Senior Equity Research Analyst at Angel Broking, said in a report.

Foreign brokerage Macquarie maintained an ‘underperform’ rating to the Yes Bank stock with a target price of Rs 8 apiece, a downside of 62 per cent from yesterday’s close. “Yes Bank also has not been making much of an operating profit for the past two quarters. There has been a flight of deposits both for retail and corporate deposits as of March 2020 for Yes Bank. A lock-in on salaries expires in a year, as per the restructuring arrangement, which could potentially see employees, including members of the sales force and senior management, leave the bank,” Macquarie said in a report.

Discount likely to make FPO attractive, but avoid fresh investment

The price band for the issue is substantially lower than the market price of Rs 21. “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,” said Ravi Singh Vice President & Head of Research at Karvy Stock Broking. He also added that Yes Bank FPO is likely to help existing shareholders to dilute their holding and the impact of past issues is still lingering. “Hence, fresh investment is not advisable,” he said.

Through this FPO, Yes Bank is aiming to raise capital to meet capital requirement needs at least for the next two years. “In our view, State Bank of India (SBI), which is a lead investor in YES Bank now with 48% stake and acting as an interim promoter, is itself trading at 0.5x. Therefore, in this background, it will be prudent to invest in SBI than in Yes Bank for now,” Arjun Yash Mahajan, Head – Institutional Business at Reliance Securities, told Financial Express Online.

Yes Bank stock back into bear grip

Analysts say Yes Bank stock continues to look weak. “While it did attempt to move up, it made a sharp reversal from the level of 29/30 and has gone back into bear grip. If it disrespects the level of 20 on a closing basis, the stock could plummet further and attempt levels closer to its all-time low,” Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments, told Financial Express Online.

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