Market price

yes bank fpo: Even at half the market price, Yes Bank FPO fails to get investors excited in the gray market

The private sector lender is poised to hit the primary market with its follow-up public offering (FPO) worth Rs 15,000 crore. The floor price of the FPO has been set at Rs 12 per share, or nearly half of the current market price.

The large discount from the current market price may have made FPO a tempting proposition for many investors, but the unlisted market is signaling otherwise. The premium for the next FPO currently stands at Rs 0.70-0.75, or only 5-6% of the floor price.

The premium halved from 1.15 to 1.25 rupees after the lender declared the price floor. Dealers in the unlisted market cited various reasons why the problem received a poor response in this unofficial market.

“The size of FPO is important. It is very unlikely that the issue will be subscribed more than once. So the chances of attribution are very high. Investors are reluctant to buy this at a higher price,” said Dinesh Gupta of Investor Zone.

Dealers expect the problem to unfold easily, given the robust liquidity conveyed by central banks and new-era Robinhood investors buying cheaper stocks.

“As this is an FPO, there is no price discovery involved and the chances of quotation gains are limited. Investors are aware of the risk / reward ratio. This limits investor response to the problem. “said Dinesh Gupta.

YES Bank was put under an RBI moratorium on March 6, 2020, but exited on March 18, after the crisis-stricken private bank proposed a rebuilding plan. Investors such as SBI, HDFC, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Bandhan Bank came to the aid of the mid-cap lender and invested Rs 10,000 crore. SBI now owns 49 percent of the bank.

However, shares of existing investors were blocked for three years as part of the reconstruction program. Market watchers say this FPO will increase the liquidity of stocks in the market.

Most domestic lenders are raising capital in the market anticipating an impact of the COVID-19 crisis on their loan portfolios. The three-month moratorium on the EMI is likely to increase the pressure on their loan portfolios.

Abhay Doshi, an independent private equity broker, said all lenders are raising new capital due to the coronavirus. “FPO is the best possible route for Yes Bank because they want to raise a huge amount,” he said.

“The bank’s loan portfolios are not in great shape, but we expect the worst to be over soon. If the NPA does not increase quickly, it can be a decent bet,” he said. he declares. “The premium in off-market trading is mainly active because of the bulk buyers,” he said.