Yes Bank FPO: Confident Of Attracting Investors At Chosen Valuation, Says MD Prashant Kumar
Yes Bank Ltd., which opens its follow-on public offer on Tuesday, is selling shares at a sharp 45% discount to the prevailing share price before the FPO was announced. Yet, the price band of Rs 12-13 per share attaches a valuation of 0.7-0.8 times price-to-book for the bank. This is comparable with the valuation of State Bank of India, which now owns 49% in Yes Bank.
Prashant Kumar, chief executive officer of Yes Bank, however said that valuation is appropriate and expects a strong response to the FPO. “We are quite confident” that the general investor base will buy into the opportunity, Kumar said in an interview with BloombergQuint.
On Monday, the bank raised Rs 4,100 crore from anchor investors at the lower end of the price bank. Bay Tree India Holding, an affiliate of Tilden Park, picked up 55% of the anchor book. Kumar said the broader mix of investors included foreign portfolio investors from across geographies and local insurers.
The FPO is looking to raise Rs 15,000 crore to help the bank meet regulatory capital ratios. Post the issue, the bank’s capital adequacy ratio will rise to 13%. Kumar expects this to be enough to meet the bank’s growth needs for the next two years.
In March, a clutch of Indian banks, led by State Bank of India, invested in Yes Bank as part of a reconstruction scheme. The scheme followed the Reserve Bank of India’s decision to place the bank under moratorium. Last week, the SBI board approved an additional investment up to Rs 1,760 crore as part of the FPO.
While the bank’s dwindled to Rs 1.05 lakh crore as of the end of March, Kumar said that there will be a net addition to deposits at the end of the June quarter. However, the loan book of Rs 1.7 lakh crore fell further in the April-June period as the bank stayed away from corporate lending. It has incrementally restarted some lending to retail and small business borrowers.
Kumar believes the risk of a large spike in bad loans is low despite the Covid-19 crisis. At 70% provision coverage, the bank has built a strong buffer he said. At a press conference last week, Kumar said the bank is looking to hive off bad assets into a separate entity.
Watch the full conversation here: