In this article, we are going to cover a detailed guide for Yes Bank FPO which is launched at 50% discount over the current price. We will also discuss every single detail like financial performance analysis including ratios, How to apply for Yes bank FPO, Price, date and Future Plans of Yes Bank after FPO, Difference between IPO and FPO (IPO vs FPO) etc.
The first thing I would like to tell you is that Yes bank has surprised its retail investors in different ways. The first surprise was given by becoming the fastest-growing private sector bank. Its share price touched Rs. 400 then the retail investors were surprised that its MD and CEO will have to resign and its share price went down. Then a new CEO was appointed when again the investors felt recovery would come, they started investing all over again yet again the prices started going down after which Yes bank gave another surprise when the Government announced that SBI will be buying this particular bank.
Another surprise to retail investors was, anyone who has a shareholding of more than 100 shares those investors can’t sell-off there 70% holding for the next 3 years With all of these surprises, Yes bank started functioning again. The shares which used to trade at Rs. 10 to Rs 15 started trading at Rs. 50 to Rs. 60 again.
After this, Yes bank has given one more surprise in which Yes bank will be launching a new FPO. The full form of FPO is Follow on Public Offering which means if anyone wants new shares, they can apply for it. and that too on the pricing of 50% discount over its current price. If we talk about retail investors here, then they have a lot of questions here.
- What is an FPO?
- In which case does a company issue FPO?
- Why is Yes bank coming up with FPO
- Whether a retail investor should invest here or not?
In this article will be talking in detail about Yes bank’s FPO, financials and why did Yes bank think of coming up with FPO.
If you want to go into details of FPO, whether you should invest in FPO or not. Before this, If you want to buy shares and buy its ownership, it is very important to know its financials How is it performing financially.
1. Yes Bank FPO Guide: Financial Performance of Yes Bank
First, we will try to figure out how is Yes bank performing financially now and according to different parameters of the banking sector, how is Yes bank performing.
Indicator 1: Deposits of Yes Bank
I will talk about the deposits of the financial year 2019. Deposits are very important as it tells you how much people trust this particular bank If I talk about Yes bank’s deposit, there has been a drop of 54% in the last year cause of moratorium, many people were not able to withdraw their money and the moment moratorium got over, they shifted their money from here to other banks Impact of this can be seen in its deposits very clearly.
Indicator 2: Profit & Loss of Yes Bank
If we talk about its overall Profit & Loss then in this particular financial year, Yes bank has incurred a loss of Rs. 16000 Cr which is considered to be a big number.
Indicator 3: CASA ratio of Yes Bank
If I talk about CASA ratio, Current account and saving account which is very important for every bank as it tells you how of the bank’s capital matches with the current account and savings account which is the cheapest This ratio is around 27%.
If I compare it with other big banks like HDFC, ICICI bank, then maximum CASA ratio of the bank is more than 40% which is considered to be a standard no. of the banking sectors.
Indicator 4: Advances Of Yes Bank
If I talk about advances on which banks get interests Even here we can see a drop of 24% in the last financial year.
2. Yes Bank FPO Guide: Yes Bank Regulatory Ratio
Now, I will talk about the ratios where the regulatory risks come under risk From 2008’s financial crisis, Basel norms were enforced Basel norms have enforced a few particular ratios for every central bank so that a few banks will have to keep some capital in a particular tier so that if a risk arises so that capital will be safe and that capital will save banks from going bankrupt.
RBI has enforced those two ratios in different percent for every bank.
- The first ratio is CET Tier 1 ratio
- Second is Capital Adequacy Ratio
Which says how much money is there in Tier 1 capital of any particular bank So what does RBI say on the percentages that should be maintained for these two ratios RBI says CET Tier 1 ratio should be more than 7.37% where RBI also says that Tier 1 capital ratio should be more than 8.8% which is the minimum requirement.
Below this, no bank should operate If it operates, a big regulatory risk exists and it shows risk in company’s financials.
If we talk about Yes bank on both these ratios or thresholds defined by RBI It is trading below those ratios which means it is not meeting both these ratios which were risky for Yes bank.
Yes bank’s CET Tier 1 ratio is around 6.3% in comparison to set 7.3% which is way lesser About the Tier 1 capital ratio, it is 6.5% in comparison to set 8.8% by RBI thus is trading at a lower rate.
These two things are very important for Yes bank and in order to meet them, it has launched FPO. Yes bank’s FPO would be of 15000 Cr. and if it succeeds in getting this amount Yes bank is planning to increase these ratios by more than 13% so that in the future, they don’t face any risk.
If I talk about any big banks like HDFC bank then normally they maintain their ratio at above 10% to 15% so that there is no issue on the bank.
With this FPO’s Rs 15000 Cr., the aim of Yes bank is to fulfill its capital adequacy ratios in order to safeguard themselves from regulatory risks.
Hope these analysis made you understand the reason behind bringing in the FPO by yes bank.
Now, I will talk about the difference between FPO and IPO.
3. Difference between FPO and IPO (IPO Vs FPO)
IPO is issued when a company gets itself listed for the first time in exchange For example, a big company, SBI cards recently got into exchange for the first time and wanted to dilute its equity and want to trade in share market after which it issued for IPO.
If we talk about Yes bank, Yes bank’s shares used to trade from before If they wanted to raise new equity, the best option with them was of FPO where they said that it wanted to raise money from its common retail shareholders wherein anyone can apply.
The current price of Yes bank before two days was of Rs. 25 on which a 50% discount has been given The main motive behind it was to gain popularity and so that many people invest in it.
Now let’s talk about FPO in detail About the FPO of Yes bank, at what price can you apply how can you apply and what kind of investors are going to apply in it.
Now I will talk about FPO in detail FPO floor price is of Rs.12 which means you can apply for it at Rs. 12 or Rs. 13 and if a retail investor wants to apply in it then a minimum of 1000 shares will have to be bought which means the lot size is of 1000 so that minimum money that you will have to invest is of Rs. 12000.
Now say if a person wants to do a big investment here, then the lot size has an overall upper cap of 15 lots which means you cannot apply for more than 15000 shares, 15 is the maximum lot that you can apply for.
4. How To apply for Yes Bank FPO?
If we talk about its dates, from when to when can a retail investor apply then The normal way to apply in it is the same as IPO, you should have your Demat account. If you have your Demat account with any broker, you might have received a CMR copy Your CMR copy, Client master report, tells you all the detail about your Demat account.
Then using those details, like what is your Demat account, you will have to put the details of your Demat account and pan card If you apply from anywhere, fill out these details and FPO gets allotted to you.
If 1000 FPO shares get allotted then you can see those particular shares in the Demat account When the FPO shares get listed on 27th July 2020. Then from that date you can trade with these shares whether it has been allocated to you or not.
5. Whether only retail investors would invest in Yes Bank FPO or Big Players Can also Invest
Now, we will talk about if only retail investors would invest in this bank’s requirement of Rs. 15000 Cr or if big players are also planning to invest here.
If we talk about FPO’s break up, what are the divisions there What is the break-up investment percentage between retail investors, anchor investors, and big investors. The breakup of this FBO as told by SBI to exchange is, QIB’s full form is qualified institutional bidders which includes public financial institutions, commercial banks, mutual funds, and foreign portfolio investors who can invest in Yes bank through QIB for whom 50% reservation has been kept aside.
So 50% will go in their accounts and from their investment, you will know how optimistic are big players about Yes bank.
After QIB, now let’s talk about NII sector who have a reservation of 15%. Now you might want to know who all come under the category of NII.
Under this category are resident Indian individuals, eligible NRIs who are from higher income groups who have a reservation of 15%.
Now we will talk about retail investors- They have a reservation of 35% from the overall chuck where a particular investor can apply in this FPO from between 15th to 17th July.
So, a big chunk has been allotted to retail investors and a 50% discount is there at its current price. It is to be seen, how will the shares trade in the future because its shares went down in the last trading year.
So the retail investors have been allocated a big chunk here because during its restructuring when SBI bought it 49% of Yes bank’s stakes at 6050 Cr. at Rs 10 per share. At that time the retail investors felt they were not given a fair chance as even they could have invested at Rs. 10.
Because of this now during FPO, a big percentage of 35% is been kept for retailers so that even they can participate here If they want to.
6. SBI’s Ownership in Yes Bank before and After FPO
One more interesting thing here is that SBI has told if needed it will invest more than 1700 cr. in this FPO If I talk about its overall ownership. SBI’s overall ownership of 48%, 49% will get diluted to 26% but if they again invest Rs.1700 Cr. here then its overall ownership will come down to more or less about 30%.
It’s simple, if the company is bringing in more shares then its equity is getting diluted If the equity is getting diluted then the ownership percentage of existing shareholders will also go down by the percent of new shares launched by the new company.
So, this was about the overall FPO.
7. Yes bank’s future planning after Successful FPO
Now let’s talk about Yes bank’s future planning so that retail investors can get some help in decision making. So the first objective set by Yes bank is to bring up their CASA ratio by 14% because CASA ratio is very important for the efficient functioning of any bank.
Secondly, Yes bank’s retail and MSME sectors loan book has to be increased above 60% of overall shares so that it can be more retail focused so that the bad loans which were a big issue in the case of Yes bank can be reduced in the future.
Yes bank has also mentioned that they want to improve return on an asset by 1% between 1 to 3 years It has to be seen in the future on how does the bank achieve that.
8. What are Yes bank’s strengths?
- Is its PAN India presence which can be utilized in any way at any time
- Yes bank is very technologically advanced as compared to other banks.
So, We wanted to tell you why does Yes bank wants to bring in FPO. Other than this, if you should know the technicalities of FPO then what all things are important I hope you might got all your answer and analyzing it a bit by yourself, you can decide whether you want to apply in this FPO or not.
As the money is yours, the decision should be yours as well on whether to invest or not.
[Note: This article is not sponsored by anyone by any means, the above write up is the personal analysis and thought of the author. We don’t provide any buy-sell or investment advisory. The above information is for educational purposes only.]