YES Bank slips 20% ahead of FPO share listing; stock tanks 45% in 2 weeks

Shares of YES Bank were locked in the 20 per cent lower circuit band at Rs 14.60 on the BSE on Thursday ahead of the listing of fresh equity shares allotted in follow-on public offer (FPO). The shares are expected to list on Friday.

On July 17, YES Bank announced the closure of the Rs 15,000 crore-equity capital raise. The bank had fixed a price band of Rs 12-13 for the public issue and raised nearly Rs 4,100 crore through anchor allotments by issuing shares at price of Rs 12 per share.

The stock of the new generation private sector bank has consistently been falling since the pricing announcement of the FPO. In the past two weeks, the stock declined 45 per cent from a level of Rs 26.65 touched on July 9, as compared to 3 per cent rise in the S&P BSE Sensex during the period.

YES Bank has stated in its prospectus that the funds raised via FPO will be used for growth and expansion including enhancing its solvency, capital adequacy ratio and evolving regulatory requirements.

The current market price (CMP) of YES Bank is not the true reflection of fundamentals given that the reconstruction scheme had locked in 75 per cent of all shares for 3 years, held by existing shareholders and new investors entering via the scheme.

Analyst at Angel Broking believes CMP will converge around FPO price once the FPO shares float in the market. However, on FPO there is no lock-in period for any investor.

“In current market, other banks are trading at attractive valuation of FY20 net worth viz. IDFC Bank (0.9x), SBI Bank (0.5x Core banking business), Federal Bank (0.9x). Our concern for Yes Bank is fresh formation of bad loans that would keep provision high and return ratio compressed for longer time,” the brokerage firm said in a note on July 14.

Retail deposit is the key for any bank for lower cost of funds. However, YBL has witnessed sizable deposit withdrawal over the last 2 quarters. Rebuilding CASA and deposits is a challenging task and would take longer time, it said.

At 10:32 am, YES Bank was trading 12 per cent lower at Rs 16 on the BSE, as compared to 0.19 per cent rise in the S&P BSE Sensex. The trading volumes on the counter jumped over 4-fold with a combined 222 million shares changing hands on the NSE and BSE till the time of writing of this report.