Sunday, 11 September 2016

YES BANK SAYS NO TO SHARE SALE AFTER SCRIP TANKS

By- Divya Vohra

Yes bank scrapped its $1-billion share sales within 24 hours of launch. The major reason behind this were an innocuous provision in the Securities and Exchange Board of India’s regulations of 2015 on listing obligations and disclosure requirements (LODR) and poor investor appetite as investors were not able to comprehend QIP (Qualified Institutional Placement). (QIP is a capital-raising tool, primarily used in India and other parts of Southern Asia, whereby a listened company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a qualified instructional buyer).

Yes Bank was among the top losers in the BSE with its shares falling 5.32% to end at Rs 11,330.65. In two days bank’s share lost 9.43% of its value.

Initially the demand was good but later it declined. After such a drastic change investors refused to put money in it and in result bank scraped it.

This is the first such cancellation of an ongoing share sale by a private sector bank in recent memory due to lack of demand, while other banks have been successful with their sales receiving strong response.

YES Bank CEO Rana Kapoor told CNBC that the offer was fully subscribed at 4 a.m. in India on Thursday, but he was advised to keep it open for three days before the regulator would allow the shares to be priced and allocated. That inordinately long window rattled bidders, especially after the stock fell as low as 1,321.25 rupees, below the minimum 1,350 rupees new share sale price.

Yes Bank can always claim that it was merely following the Securities and Exchange Board of India’s guidelines on not unfairly diluting current shareholders. But in that case, it would have done well to eschew the hubris of trying to raise $1 billon, half the bank’s existing equity, in a single shot from investors who may not be entirely convinced it deserved to be bought at more than four times last year’s book value.

Yes Bank might continue to outperform its rivals, giving investors many good reasons to take a punt on it. 

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