Yes Bank Set for Major Comeback with Additional Fund Raising Through the FPO Offer from July 15

Yes Bank's Rs 15,000 crore follow-on public offer (FPO) is set to hit the markets on 15 July. The bank has announced the floor price to be Rs 12 with a cap of Rs 13 per share, which is half of Friday's closing price of Rs 25.50. The pricing is attractive for new investors but there's more to understand before one invests in it.

Details on FPO The issue price is placed at Rs 12-13 per equity share. The FPO will open for anchor investors on 14 July and for all other categories of investors, the offer period will be July 15-17, 2020. Yes Bank's Capital Raising Committee (CRC) of the Board of Directors will meet on 14 July to allot shares to successful anchor investors who have pursued the offer and also determine an allocation price. A discount of one rupee per equity share will be given to the eligible employees of Yes Bank bidding in employee reservation portion. 

A maximum of Rs 200 crore worth of shares has been reserved for the employees of the bank. Interested investors can place bids in lots of 1,000 equity shares. The FPO is by the issue of fresh equity. State Bank of India (SBI), the largest stakeholder in Yes Bank, said last week that its central board has given approval for a maximum investment of up to Rs 1,760 crore in the FPO of Yes Bank. Background on Yes Bank and the FPO Amid rising debt and management issues, the government had approved RBI's (Reserve Bank of India) bailout plan for Yes Bank on 13 March 2020. 

Under the plan, Yes Bank received around Rs 10,000 crore from eight Indian financial institutions, including SBI, ICICI Bank, Kotak Mahindra Bank, HDFC, Axis Bank, Bandhan Bank, Federal Bank and IDFC First Bank, via the equity route. Back in March, the reconstructed bank's board had approved plan to raise funds up to Rs 15,000 crore, by way of issuance of securities.   To boost capital levels in line with regulatory norms, Yes Bank's board is going to launch the FPO. The attractive discount given in the FPO will attract more market investors and reduce the burden on the consortium of banks that are the stakeholders. 

Further, experts say that Yes Bank chose the FPO route as it allows freedom in pricing the issue when compared to a Qualified Institutional Placement (QIP) route which requires pricing around recent market prices as per a formula set by SEBI (Securities and Exchange Board of India). Due to a rise in NPAs (non-performing assets) and subsequent provisioning for the same, Yes Bank could not meet RBI's capital adequacy requirements. 

At the end of March 2020, the Tier 1 capital ratio for the bank was 6.5 percent, much below RBI's requirement of 8.875 percent, calling for the newly formed board to approve a fundraising plan. For the March ended quarter, Yes Bank reported a net profit of Rs 2,629 crore after the private lender wrote down additional tier-1 bonds as part of its reconstruction scheme. If the write-down was excluded, the bank's loss for the quarter was at Rs 3,668 crore, against a loss of Rs 1,507 crore in the same period of last year. 

After reporting a record loss of Rs 18,564 crore for the December-ended quarter, Yes Bank said that it is deemed to be "non-viable or approaching non-viability and accordingly the triggers for a write-down of certain Basel III AT-1 bonds have been triggered". As part of its reconstruction plan, its additional tier (AT-1) bonds worth Rs 8,415 crore of the Rs 8,695 crore issued, were written down in March, affecting mutual funds and other investors who had invested in them for the high-interest rates.

Is Silicon Valley on a reviving phase?

Martin Pichinson has never been busier. The co-owner of Sherwood Partners makes his living by helping the financial backers of start-up firms that file for bankruptcy and wind down their operations.

This year, he's helped shut down 30 firms -- more than the total number in 2008. "Business is booming. It's exploding," Pichinson said from his Silicon Valley offices. "It's sad," he added. Venture capitalists and market experts expect the pace of firms that shutdown in the tech industry to accelerate this year, potentially rivaling the dot-com crash, as funding dries up.

Mergers, acquisitions and IPOs are no longer a reliable exit strategy with capital markets tanking and buyers wary. So as in 2000, investors are now putting pressure on their invested firms, forcing them to cut back and save, or just cashing out and cutting their losses. Others say they are hunkering down and awaiting a turnaround and a resumption in deal and IPO activity in 12 to 18 months.

Paul Deninger, vice chairman of investment bank Jefferies & Co in Boston, reckons that about a 10th of the 500 to 1,000 start-ups his institution now tracks nationwide will fail. "The mergers and acquisitions market is firing on four out of eight cylinders," said Deninger, who runs a team that advises on deals. "Are we in a recession or depression? If 18 months from now we're in the same situation as today, then we have a much more serious problem."

To entice investment from a shrinking cash pool, startups now have to come up with fully realized business strategies. Next week, many of Silicon Valley's venture capitalists and chief executives gather near Palm Springs for Demo.Com, a conference showing off undeveloped new products and technology. But unlike in years past, organizers expect many products will be tied to fleshed out business plans and market strategies.

"Companies will present a solid business proposition with a clear path to revenues," promised Chris Shipley, Demo's producer. Last year, many of the start-ups there hoped to "collect a lot of customers and then figure out how to create business value around them. That's not working in the market today." Silicon Valley got a wake-up call in October, when a private slide-presentation put together by well-known VC Sequoia somehow got leaked onto the Internet.

Entitled "RIP Good Times", it forced an already-nervous industry to mull over declarations like "it is different this time," and "recovery will be long," and "spend every dollar as if it were your last." Venture capital funding tanked 71 per cent in the fourth quarter of 2008, but investment hasn't completely vanished. This week alone, Apparent Networks Inc of Massachusetts, which designs software to help firms access networks, raised $12 million from venture firms.

Aveksa Inc, which tailor-makes security software for corporations, secured $10 million. And private equity investor Good Energies invested $20 million in SAGE Electrochromics Inc, a 20 year-old firm that makes glass-coverings to cut heating and lighting costs. But investors are getting pickier, scrutinizing every firm as rigorously as they had in the bubble's aftermath.

Michael Kwatinetz of San Francisco's Azure Capital agreed that the era of "fluffy" investments was over -- not a bad thing if healthier and more fiscally responsible companies emerge. "Get your burn rate under control. Even the best companies are cutting their forward expense rate," Deninger advised.

Agencies