Rana Kapoor-led Yes Bank Ltd. raised $750 million by placing equity with institutional investors last week, after a similar attempt to raise $1-billion failed in September 2016.
Interestingly, the March Qualified Institutional Placement (QIP) was done at a floor price 9.2 percent higher than the September offer.
It was a “well received offer”, a banker involved with the issue told BloombergQuint, referring to demand. The banker, who didn’t want to be identified, declined to disclose the overall subscription since the pricing and allotment will be decided on March 29.
While the lender and investment banks involved would not comment on the factors that aided this second effort, other bankers BloombergQuint spoke to, also on the condition of anonymity, pointed to two changes in the intervening months that may have helped this QIP: that Yes Bank’s improved earnings pushed up its stock price and that the offer was managed by four merchant banks versus the dozen involved in previous effort. Bank of America Merrill Lynch, IIFL, CITIC CLSA, and Motilal Oswal managed the qualified institutional placement this time. The latter two were also involved in the previous attempt.
Yes Bank’s earnings in the quarters ended September and December 2016 beat street expectations and its stock bridged the valuation gap with better-performing rivals like HDFC Bank Ltd. and Kotak Mahindra Bank Ltd. The bank’s shares rose more than 15 percent since the failed September issue till Friday, when the latest offer closed. This helped the bank set the offer floor price at Rs 1,498.95 apiece versus the September floor price of Rs 1,371.84 per share. And the stock ended with gains on Friday, unlike in September when it fell below the floor price.
Also Read: Yes Bank’s Profit Rises 31%, Asset Quality Remains Stable
Since September 2016, Yes Bank’s stock has rebounded as the benchmark NSE Nifty 50 Index hit all-time highs and foreign portfolio investors turned net buyers.
What Went Wrong Last Time?
In April last year, Yes Bank got shareholder approval to raise up to $1 billion and filed a pre-placement document with stock exchanges on September 7.
The QIP opened after the market hours of September 7 – its stock having closed at Rs 1,401.55. The floor price was set at 1,371.84 per share with an option to offer an up to 5 percent discount.
When trade resumed on September 8, the Yes Bank share price tumbled, closing at Rs 1,328.25 per share on the National Stock Exchange (NSE), over 5 percent lower than the previous day’s close, but worse, over 3 percent lower than the QIP floor price.
It’s not clear what prompted the fall in Yes Bank’s share price, but it’s decline to below the floor price led to the placement being aborted.
The bank initially blamed the failure on a regulatory requirement, but later, in a filing to the NSE, cited market volatility as the reason for scrapping the offer. Declining to comment on rumours of inadequate investor demand, Yes Bank said in a statement to the NSE on September 22 that it had nearly $1.04 billion in investor commitments on September 8 morning.
Also Read: Yes Bank Share Sale: Hit By Regulation Or Demand?
Use OF Funds
Yes Bank plans to use the funds raised last week to meet the capital requirement under Basel III norms.
According to data compiled by BloombergQuint, the issue will improve the bank’s common equity capital adequacy ratio to 11.75 percent and the total capital adequacy to 18.7 percent against the Reserve Bank of India’s requirement of 8 percent and 11.5 percent, respectively.
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