Yes Bank Ltd FPO (Yes Bank FPO) Detail

About the company:

Issue Details

Dates: July 15 to July 17, 2020

Price: Rs. 12 to Rs. 13 per share

Minimum Lot: 1,000 equity share shares and in multiple thereof  

Minimum Application Amount: Rs. 12,000 to Rs. 13,000 

Total Issue Size: 15,000 Crores

Objects of the Offer

Yes Bank's CET I ratio (which measures solvency of bank) was at 6.3% as of March 31, 2020. The RBI had prescribed a minimum CET I ratio of 7.375% to be reached by March 31, 2020 but this wasn"t met. Hence, in order to comply with these requirements of the RBI with respect to CET-I ratio of 8% by September 30, 2020 and to support the Bank's growth plans, bank intends to raise this equity capital.

As per RHP too, it has mentioned that the proceeds from FPO would be utilized towards ensuring adequate capital to support growth and expansion of the Bank, including enhancing solvency and capital adequacy ratio.

Financial Overview

The Bank reported a net loss of Rs. 16,418 Crs in FY20. Their deposit base was seen down 54% YoY in FY20 to Rs. 1.05 trillion, while interest earning assets i.e. the advances were down 29% YoY to Rs. 1.71 trillion. Net non-performing asset as on March 31, 2020 stood at 5.03%.  

Medium-term Objectives

(a) stabilise liability mix and lower cost of funds with an aim to increase CASA ratio to more than 40%;

(b) provide granular advances, with retail, SME and Medium Enterprises being more than 60%;

(c) enhance corporate flows and cross-selling through transaction banking; and

(d) increase ROA to above 1% within the next one to three years and above 1.5% within the next three to five years.

Inherent Strengths

Whether these medium term objectives would be achieved by the Bank or no, only time will tell. But as of now it does have its own inherent strengths to support these intentions such as:

(a) It has a wide Pan-India presence across 28 states and 8 union territories. And as on March 31, 2020 the bank has 1,135 branches and 1,423 ATMs.

(b) Strong focus on retail and SME advances

(c) Strong technology backbone and

(d) Bank has Public-private ownership model with simplified organizational structure.

Conclusion

Given the backing of State Bank of India and its commitment to participate in Yes Bank's FPO of upto Rs. 1,760 Crs, it appears to be worth taking a risk to subscribe to this FPO. However, this is a very high risk-high reward investment and only investors with a high risk appetite and comfortable liquidity position with time horizon of atleast 2-3 yrs can look to subscribe to this high risk-high reward FPO. 

Source: FPO prospectus filed with RoC