Prospective investors indicate appetite for YES Bank FPO at discount

Ready to invest at Rs 12-15 per share, a 50 per cent discount to current market price

Set to launch its follow-on public offer (FPO) by the middle of this month, YES Bank is getting an indicative price range of Rs 12-15 a share from prospective investors, say bankers.

During roadshows, investors said they were keen to invest in the FPO. Considering the huge bad debt saddled with the bank, they would be able to invest at a significant discount to the current market price. On Wednesday, the YES Bank stock closed at Rs 26.95 a share.

An email sent to YES Bank did not elicit any response.

The bank has received shareholder approval to launch the FPO to raise up to Rs 15,000 crore, but bankers said the bank may sell shares worth Rs 8,000 crore in the first tranche.  

The bank needs the funds from the share sale to boost its capital base which had eroded sharply due to bad loans to several companies, including Dewan Housing Finance Corporation, Cox & Kings, Essel Group, Crompton Greaves, and real estate companies.

During roadshows, investors had asked the bank to clean up its books. They had raised queries on the bank’s additional provision of Rs 15,422 crore for the period ended December 2019, following an evaluation of its non-performing assets.

The provisioning was based on discussions with the regulator over and above the Reserve Bank of India (RBI) norms related to the minimum provision to be made by banks on their loans and advances.  

In the financial year ended March, BSR & Co. LLP — the auditor of YES Bank — also pointed out breaches of several RBI norms and loan covenants by the private bank, which may impact the bank’s ability to continue as a going concern.  

Besides, the auditor said as the fate of its additional tier-1 bonds worth Rs 8,415 crore are currently pending in court, any adverse judgment would impact the bank further.