YES Bank defers $1 bn QIP

YES Bank on Thursday said it has deferred its $1 billion equity raising plan because of “misinterpretation of guidelines” amid sharp drop in its stock price. The private sector lender on Thursday launched its qualified institutional placement (QIP) to raise up to Rs 6,700 crore in the price range of Rs 1,350-Rs 1,410. In the secondary market trading, however, shares of YES Bank dropped over 5 per cent to below the QIP price at Rs 1,330.

“Due to extreme volatility during today’s trading day because of misinterpretation of new QIP guidelines, YES Bank has been advised by its appointed merchant bankers to defer its proposed QIP,” the bank said in an exchange filing.

As per Securities and Exchange Board of India (Sebi) guidelines, a listed entity has to give a two-day prior intimation to a stock exchange of its fund raising by way of QIP, rights issue or preferential allotment. And the pricing and allotment has to be done on the third working day.

In YES Bank’s case, its internal committee approved the QIP on September 7 and it had to be kept open till September 12 to meet Sebi’s two-day advance notice criteria.

Rana Kapoor, managing director and CEO, YES Bank told a news channel that the response to the QIP was “overwheliming” but “lack of understanding of the regulation” created uncertainty.

“Guidelines necessitate keeping the QIP open for three days. In the process, the volatility sinks in… It is not a good policy we are going to represent (Sebi) on this in the next few days and open the QIP in the due course of time,” he said.

According to sources, YES Bank’s QIP was subscribed 1.1 times before the Indian markets opened, however, lot of investors withdrew their applications after the bank’s stock fell below the QIP price. “A lot of investors backed out as nobody wants to stare at a mark-to-market loss on day one. Also, the pricing has to be as per Sebi formula which didn’t leave much room for altering the QIP price,” said an investment banker.

As per Sebi formula, the floor price for a QIP has to be the average price for the last 14 trading sessions. An issuer can offer up to five per cent discount on the floor price. Based on this formula, YES Bank had arrived at a floor price of Rs 1,371.84 and priced the IPO at Rs 1,350-1,410.

Shares of YES Bank have had a good run at the bourses this year having gained around 80 per cent. The lender’s market capitalisation is more than Rs 56,000 crore. The QIP could have caused dilution of more than 10 per cent.