YES BANK’s ₹15,000 crore Follow-on Public Offer

YES BANK announced that it has filed paper for its proposed follow-on public offer (FPO), through which the lender is aiming to raise ₹15,000 crore. The FPO issue will be open from July 15 to July 17.

What is an FPO?

Follow-on public offer (also called as further public offer) is a process when an already listed company in a stock exchange issues new/additional shares to the public to raise funds. The company has to file its prospectus for FPO with the Registrar of Companies (RoC).

Market participants like mutual funds, individuals, Foreign institutional investors (FIIs), etc can bid for an FPO.

Sounds similar to initial public offering (IPO), but it is not the same.

The main difference:

IPO is the first public issue of the shares of a private company through which it enters the stock market, whereas, FPO is the second or subsequent public issue of the shares of an already listed company. A company cannot issue FPO before getting listed in the stock exchange.

Meeting requirements

YES BANK’s capital ratios are below the Reserve Bank of India’s (RBI) mandatory regulatory requirements. The bank’s capital adequacy ratio stood at 8.5% as of March 31,2020, with its core Tier 1 capital at 6.3%. Therefore, the proposed fundraising will help the bank get on track with respect to meeting its capital ratios above the regulatory levels.

*Capital adequacy ratio (CAR) is a ratio to the bank’s capital to risk. It helps in understanding if the bank has enough capital to absorb a reasonable amount of risks and losses.

*Tier-1 capital refers to core capital that consists of equity capital, reserves and retained earnings.

State Bank of India (SBI) said that its maximum investment in YES BANK’s FPO will be of up to ₹1,760 crore. As per BSE shareholding pattern data, SBI holds a 48.21% stake in YES BANK as of March 31.

The capital raising committee (CRC) meeting is scheduled to be held on or after 10 July, to consider and approve the price band and discount for the offer, if any, YES BANK said.

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