Yes Bank FPO opens today, but don’t eye listing gains

Mumbai: Investors looking for listing gains should avoid Yes Bank’s Rs 15,000-crore follow-on public offer (FPO) scheduled to open on Wednesday, said analysts.

Investors who intend to hold the shares for over three years could subscribe to the issue, they said. The private lender has priced the issue at Rs 12 per share as against Tuesday’s closing price of Rs 20.95.

The issue is likely to be fully subscribed, said analysts. But some traders have devised a strategy to profit from the offer, they said.

“For those applying in this FPO, it would be immature to assume that one would subscribe at 13 and sell on allotment at a huge profit as almost everyone may want to utilise that opportunity to make a quick buck,” said independent market advisor Ambareesh Baliga.

Traders, who sold shares they did not own — called short-selling — a few days ago to bet on the fall in the stock price before the FPO, are likely to subscribe aggressively to the issue. Since the announcement of the FPO price, the stock has fallen almost 20 per cent. “The smarter traders or investors have already done the reverse deal by selling Yes Bank in the last few days to buy it back in the FPO,” said Baliga.

The FPO will help the lender meet its capital requirements for the next two years. In March, the government had approved a rescue plan for Yes Bank backed by SBI. The stock has fallen 77.5 per cent in the last year.

Brokerage Nirmal Bang has an ‘avoid’ stance on the FPO. “The FPO, at 12-13 per share, is priced at less than 1-time post-infusion FY20 book value and a 45 per cent discount to the current market price...given the current economic situation the issue is aptly priced,” said Nirmal Bang.

“At the upper end of the price band, Yes Bank demands adjusted price to book of 0.85 times post considering the FPO. In the current market, other banks are trading at an attractive valuation of FY20 net worth — IDFC Bank (0.9 times), SBI (0.5 times core banking business), Federal Bank (0.9 times),” said Angel Broking.

Baliga is bullish on the stock in the long run. “Market forces may ensure that the gap between the FPO and the market price would narrow by the time allotment takes place, but it could be a good time to lock in the investment with a long-term view to ride the journey of sustainable growth for this bank,” he said.