FPO to open on July 15, Yes Bank highlights PCA trigger risk in red herring prospectus

The bank had earlier filed an RHP to raise up to Rs 15,000 crore through issuance of fresh equity shares.

The follow-on public offer (FPO) of Yes Bank will open on July 15 and close on July 17, as per the red herring prospectus (RHP) filed by the bank. The lender has highlighted several risks that it faces in the current environment.

In its RHP, Yes Bank said there is a risk of the prompt corrective action (PCA) being imposed by Reserve Bank of India (RBI) due to lower capital ratios. The bank also mentioned 167 pending litigations, which could have material impact of Rs 56,717 crore on the lender.

The bank had earlier filed an RHP to raise up to Rs 15,000 crore through issuance of fresh equity shares.

The bank has said given the material uncertainty on capital infusion and depletion of deposits, “there can be no assurance that we will be able to continue as a going concern”. The bank saw 54% year-on-year (y-o-y) drop in deposits to Rs 1.05 lakh crore at the end of the March quarter.

The bank has also specified uncertainty arising due to Covid-19 and risk of rising non-performing assets (NPAs). “We may not be able to accurately anticipate the impact of the Covid-19 pandemic or other economic and financial events on our customer base and credit quality,” the lender said. The bank has also mentioned there is a risk of higher NPAs. “Our NPAs may increase in future and any significant increase in NPAs may have a material adverse effect on our financial condition and results of operations,” Yes Bank said.

“In addition, the breach of the regulatory minimum capital ratio requirement may trigger PCA,” it further said. “We have also been in constant communication with the RBI and the RBI has not imposed any fine for the regulatory breaches yet.”

The central bank puts partial restrictions on loan disbursements, among other curbs, after a bank is brought under PCA.

Yes Bank’s common equity Tier-1 (CET 1) capital stands at 6.3% as of March 2020, which was lower than the RBI’s minimum requirement of 7.375%.

Out of the total pending litigations, 137 cases involving worth Rs 22,875 crore have been filed by Yes Bank against other parties, while 29 cases have been filed against Yes Bank having material impact worth Rs 25,426 crore.

The anchor investor bidding date will be July 14, the bank said in a stock exchange filing. State Bank of India (SBI) has approved infusion of up to Rs 1,760 crore in Yes Bank’s FPO.

The book running lead managers of FPO are Kotak Investment Banking, SBI Capital Markets, Axis Capital, Citi, Bank of America Securities, HSBC, ICICI Securities and Yes Securities.

The board of the bank is going to meet on Friday to decide on the other modalities of the FPO.