1
Please refer to important disclosures at the end of this report
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1
Yes Bank Ltd. (YBL), a new generation private sector bank, was incorporated in
November 2003 by Mr. Rana Kapoor and Mr. Ashok Kapur. However, the RBI
superseded the Board of Directors of the bank and imposed a moratorium on YBL
from March 05, 2020. Further, on March 13, 2020, the government had
approved a bailout plan for Yes Bank. Under the plan, Yes Bank had received
around `10,000cr from eight financial institutions, including `6,050cr from SBI.
Currently, pre-FPO, SBI owns 48.21% in Yes Bank.
Weakening operations, business metrics; SBI support to take longer time for
stabilizing: Yes Bank was having deposits worth `2,27,610cr as on Q4FY2019,
however, it dropped to `2,09,497cr in Q2FY20. Further, as a result of the
negative news in Q3 & Q4 of FY2020, the bank witnessed sizeable deposit
withdrawal of `1,00,000cr reaching to `1,05,364cr in Q4FY2020. CASA deposits
declined 63% yoy to `28,063cr. We believe rebuilding term deposit and CASA
would be a challenging task, nevertheless SBI image would likely help YBL to stop
further depletion in deposit base. Moreover, constraint in capital and deposit
withdrawal has impacted loan book too, which declined 29% yoy in FY20;
consequently, adversely impacting NII and other income. Subsequently pre-
provision profit plunged 56% in FY20.
Improvement in asset quality a far off thing; economic slowdown to add to
existing woes: GNPA for FY2020 spiked 4.2x to `32,878cr, which led to 6x
increase on provision on bad asset. This impacted profitability adversely, and YBL
reported loss of `16,418cr. However, on positive side, YBL’s provision coverage
ratio increased to 74%. We believe the bank’s provision cost to remain elevated
owing to (1) high overdue advances (SMA I & II) that stood at 6.5% (`11,102cr) of
the standard advances as on Q4FY20, (2) Covid led slowdown in economic
activity to impact bank’s exposure to segments like real estate, hospitality, travel
and tourism
Gap between FPO price & CMP: We believe current market price of Yes Bank is
not the true reflection of fundamentals given that the reconstruction scheme had
locked in 75% of all shares for 3 years, held by existing shareholders and new
investors entering via the scheme. Hence, we believe CMP will converge around
FPO price, once FPO shares float in the market. However, on FPO there is no
locked in period for any investor.
Market outlook and valuation: At the upper end of the price band, Yes Bank
demands Adj. PB of 0.85x post considering FPO. In current market, other banks
are trading at attractive valuation of FY20 net worth viz. IDFC Bank (0.9x), SBI
Bank (0.5x Core banking business), Federal Bank (0.9x). Our concern for Yes
Bank is fresh formation of bad loans that would keep provision highs and return
ratio compressed for longer time. Retail deposit is the key for any bank for lower
cost of funds; however, YBL has witnessed sizable deposit withdrawal over last 2
quarters. Rebuilding CASA and deposits is a challenging task and would take
longer time. Overall, the bank’s revival and decent RoE numbers will take longer
time. Considering above factors, we recommend NEUTRAL rating for FPO.
Key Financials
Y/E March
FY17
FY18
FY19
FY20
NII
5,797
7,737
9,809
6,805
% Chg
27
33
27
(31)
Net Profit
3,330
4,225
1,720
(16,432)
% Chg
31
27
(59)
(1,419)
NIM (%)
3.4
3.3
3.1
2.4
EPS (`)
1
2
1
(9)
P/BV (x)
1.5
1.3
1.2
0.9
RoA (%)
1.8
1.6
0.5
(7.1)
Source: Valaution done on upper price band and FY20 PBV considered FPO.
NEUTRAL
Issue Open: July 15, 2020
Issue Close: July 17, 2020
Offer for sale: ` -
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters
0.7%
Others
99.3%
Fresh issue: `15,000cr
Issue Details
Face Value: `2
Present Eq. Paid up Capital: ` 2510cr
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: `5,013cr
Issue size (amount): *`15,000cr
Price Band: `12-13
Lot Size: 1000 shares and in multiple
thereafter
Post-issue implied mkt. cap: *`30,079cr -
**`31,332cr
Promoters holding Pre-Issue: 1.4%
Promoters holding Post-Issue: 0.7%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Yes Bank
FPO Note | BFSI
July 14, 2020
2
July
14,
Yes Bank| FPO Note
July 14, 2020
2
Issue details
Yes Bank FPO is raising `15,000cr through fresh issue.
In this FPO, there is a reservation (`200cr) kept for employees of Yes Bank, along
with this they will also get `1/- discount.
Exhibit 1: Pre and Post Shareholding Pattern
Particular
No of shares
(Pre-issue)
%
No of shares
(Post-issue)
%
Promoter
17,79,40,925
1.4
17,79,40,925
0.7
Investor/Public
12,37,25,31,306
98.6
24,88,76,82,820
99.3
12,55,04,72,231
100.0
25,06,56,23,745
100.0
Source RHP Note : Calculated on upper price band
Objects of the offer
Ensuring adequate capital to support growth and expansion, including
enhancing the Bank’s solvency and capital adequacy ratio
Risk
Improvement in asset quality and Deposit in mid term would be key risk to our
NEUTRAL call.
Exhibit 2: Relative Valuation
Banks (` cr)
Mcap
NW
Advance
Deposit
GNPA
NPA
PCR
PBV FY20
Yes Bank
31,332
36,726
1,71,443
1,05,364
16.8
5.0
70
0.85
Axis Bank
1,24,056
84,947
5,71,424
6,40,105
4.9
1.6
68
1.46
ICICI bank
2,33,366
1,12,091
6,45,290
7,70,969
5.5
1.4
75
1.45
IDFC Bank
15,372
17,342
85,595
65,108
2.6
0.9
64
0.94
SBI Bank
1,74,000
2,08,244
24,22,845
32,41,621
6.2
2.2
64
0.50
Bank Of Baroda
23,842
65,776
6,90,121
9,45,985
9.4
3.1
67
0.37
Federal Bank
10,800
14,513
1,24,153
1,52,290
2.8
1.3
54
0.89
HDFC Bank
6,06,731
1,70,985
9,93,703
11,47,502
1.3
0.4
71
3.55
Canara Bank
15,000
32,959
4,51,223
6,25,351
8.2
4.2
49
0.58
Source: Company, Valaution done on closing price of 10/7/2020
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July
14,
Yes Bank| FPO Note
July 14, 2020
3
Income Statement
Particular (` cr)
FY17
FY18
FY19
FY20
Net Interest Income
5,797
7,737
9,809
6,805
- YoY Growth (%)
27
33
27
(31)
Other Income
4,157
5,224
4,590
3,441
- YoY Growth (%)
53
26
(12)
(25)
Operating Income
9,954
12,961
14,399
10,247
- YoY Growth (%)
37
30
11
(29)
Operating Expenses
4,117
5,213
6,264
6,706
- YoY Growth (%)
38
27
20
7
Pre - Provision Profit
5,838
7,748
8,135
3,541
- YoY Growth (%)
36
33
5
(56)
Prov. & Cont.
793
1,554
5,778
32,758
- YoY Growth (%)
48
96
272
467
Profit Before Tax
5,044
6,194
2,357
(29,217)
- YoY Growth (%)
34
23
(62)
(1,339)
Prov. for Taxation
1,714
1,970
637
(6,530)
- as a % of PBT
34
32
27
22
PAT
3,330
4,225
1,720
(22,688)
Extraordinary Item
(Net of tax )
6,297
Adj Pat
3,330
4,225
1,720
(16,391)
Balancesheet
Y/E March (` cr)
FY17
FY18
FY19
FY20
Equity
456
461
463
2,510
Reserve & Surplus
21,598
25,298
26,441
19,216
Networth
22,054
25,758
26,904
21,726
Deposits
1,42,874
2,00,738
2,27,610
1,05,364
- Growth (%)
28
41
13
(54)
Borrowings
38,607
74,894
1,08,424
1,13,791
Other Liab. & Prov.
11,525
11,056
17,888
16,946
Total Liabilities
2,15,060
3,12,446
3,80,826
2,57,827
Cash Balances
6,952
11,426
10,798
5,944
Bank Balances
12,597
13,309
16,092
2,439
Investments
50,032
68,399
89,522
43,915
Advances
1,32,263
2,03,534
2,41,500
1,71,443
- Growth (%)
35
54
19
(29)
Fixed Assets
684
832
817
1,009
Other Assets
12,532
14,946
22,098
33,077
Total Assets
2,15,060
3,12,446
3,80,826
2,57,827
- Growth (%)
30
45
22
(32)
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July
14,
Yes Bank| FPO Note
July 14, 2020
4
Key Ratio
Particular
FY17
FY18
FY19
FY20
Profitability ratios (%)
NIMs
3.4
3.3
3.1
2.4
Cost to Income Ratio
41.4
40.2
43.5
65.4
RoA
1.8
1.6
0.5
-7.1
RoE
18.6
17.7
6.5
-93.3
B/S ratios (%)
CASA Ratio
36
36
33
27
Credit/Deposit Ratio
0.9
1.0
1.1
1.6
Asset Quality
Gross NPAs %
1.52
1.28
3.22
16.80
Gross NPAs (Amt)
2,019
2,627
7,883
32,878
Net NPAs %
0.81
0.64
1.86
5.03
Net NPAs (Amt)
1,072
1,313
4,485
8,624
Credit Cost on Advance %
0.60
0.76
2.39
19.11
Provision Coverage %
47%
50%
43%
74%
Per Share Data (`)
EPS
1.3
1.7
0.7
-9.1
BV
8.8
10.3
10.7
14.7
Valuation Ratios
PER (x)
9.8
7.7
18.9
-1.4
P/BV
1.5
1.3
1.2
0.9
Valuation done at upper price band and FPO share considered
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July
14,
Yes Bank| FPO Note
July 14, 2020
5
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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