Yes Bank, one of India’s top five private lenders, is issuing its follow-on public offer on July 15. An FPO is issued when an already listed company issues new shares to the public for raising funds. The bank is aiming to raise Rs 15,000 crore from the FPO.
Here’s what you need to know about the FPO:
According to the RBI norms, every bank needs to have a certain amount of capital with them at all times. Not following them will draw regulatory and financial risks. We have covered the regulatory requirement further into the article. The Capital raising committee (CRC) of the bank’s board of directors decided on the FPO to boost its capital for its growth and expansion plans.
The FPO is slated to launch on July 15 and end on July 17. For anchor investors, the issue was opened on July 14. Anchor investors are basically institutional investors who are invited to subscribe to the issue before an IPO or FPO is opened up for the public.
Issue size is generally the total amount the issuing entity is planning to raise. Here, the issue size is Rs 15,000 crore, of which, Rs 200 crore is reserved for the yes Bank employees. Around 50% is reserved for qualified institutional buyers (QIB), not less than 15% as non-institutional investor (NII) portion and 35% as a retail portion. QIBs are public financial institutions, commercial banks, mutual funds and foreign portfolio investors and NIIs are resident Indian individuals and NRIs who are in the higher income groups.
The price band reserved for the IPO is Rs 12-13 per share with a discount of Re 1 for eligible employees of the bank bidding through the Employee Reservation portion.
A minimum bid lot of 1,000 shares is available and in multiples of 1,000 thereafter. The cap is 15 lots, which is 15,000 shares.
How To Apply For Yes Bank FPO?
You can apply on your bank’s website throughout the online ASBA facility. ASBA stands for Application supported by blocked amounts (ASBA). It holds funds in your account without actually debiting it. You can generally find the ASBA facility in e-services or net banking services option. ASBA facility allows you to invest in FPOs and IPOs as it will show all the live issues currently.
You will then be asked for a few details.
You need to have a demat account to apply for this FPO. If you have a demat account with any broker, you would have received a CMR or client master copy (CMR) report. This gives you details on your demat account. For example, if you opened your demat account with us, then your depository will be CDSL. So when you apply for the FPO, you will have to feed in details like your demat account number, PAN number, depository name and likewise.
If you apply for the FPO, these shares will show up in your demat account.
A Little About Yes Bank
Yes bank ran into trouble after RBI pulled it up for grave under reporting of bad loans in November last year. Bad loans or non performing assets are loans given out by banks that have little to no scope of recovery from the borrower.Between 2004, when the bank was launched) until 2015-16, the bank has given out loans to several sectors like NBFCs, real estate and manufacturing companies. NPAs started piling up in the books of Yes Bank over the years and improper reporting of these bad loans was noticed by RBI.
In March 2020, the RBI came up with a draft revival plan wherein Yes Bank was to be backed by a consortium of banks led by the State Bank of India.
SBI was to pick at least 26% stake in the bank. As of now, SBI has infused more than Rs 7,000 crore for a little more than 48% stake in Yes Bank. SBI and seven other lenders have infused above Rs 10,000 crore in Yes Bank under the revival plan.
Yes Bank’s Financials
Profit and Loss: The bank reported a net loss of around Rs 16,432.5 crore in FY 19-20 as compared to a net profit of Rs 1,709.26 crore in the financial year ended March 2019.
Assets: According to an exchange filing, the bank’s assets have fallen to Rs 2.57 lakh crore at the end of March 2020 from Rs 3.12 lakh crore at the end of March 2018.
Deposits: Its deposits too declined to Rs 1.05 lakh crore as on march 2020 as compared to around 2 lakh crore as of March 2018. RBI had imposed a Rs 50,000 cap on withdrawals on March 3 per savings account. A customer could not withdraw more than that amount until April 3. However the cap was lifted well before the April 3 deadline on March 18. After the cp was lifted, the bank saw a surge of deposits being withdrawn by customers which explains the drop in deposits.
NPAs: The bank’s gross NPA was 16.8% of the gross advances and net NPAs amounted to Rs 5.03% of the net advances.
Casa Ratio: The CASA ratio at the end of March for Yes Bank was 27% where the ratio is generally more than 40% for most banks. Casa ratio, which stands for current account and savings account, tells us how much deposits does the bank have in these two accounts in relation to the total deposit. A higher CASA ratio which is basically higher deposits in current and savings accounts is a good sign because the interest paid in savings accounts deposits is minimal and in current account, banks don’t pay interest. So it basically means that the bank’s cheaper source of funds is higher which speaks volumes on the bank’s operating efficiency.
Capital Requirements: After the capital infusion by the private banks consortium, Yes Bank’s total capital adequacy ratio (CAR) stood at 8.5% in the March quarter of which common equity tier I (CET1) ratio was 6.3% and Tier II ratio was at 2%. According to RBI, CET1 ratio should be at least 7.37%. The total tier I capital ratio for the bank stood at 6.5% and RBI rules require the bank to have at least 8.8%.