YES Bank clients' Rs 1,500-crore SBI Cards IPO applications hang in balance

Sources say nearly Rs 1,500 crore worth of applications are impacted by the crisis at YES Bank
The fate of applications worth nearly Rs 1,500 crore in the SBI Cards and Payment Services’ initial public offering (IPO) hangs in the balance as many corporate and individual investors have bid in the share sale through YES Bank, which is placed under moratorium by the Reserve Bank (RBI). 

While investors have adequate funds in their YES Bank accounts, the moratorium would mean their funds will not be able to move from their account to that of the issuer company. The country’s second-largest credit card company’s Rs 10,300-crore IPO closed on Thursday, hours before the RBI imposed the curbs.

Sources say investment bankers handling the SBI Cards IPO have raised this issue with the Securities and Exchange Board of India (Sebi).

“In light of what has happened, we have asked the regulator whether applications backed by YES Bank accounts should be considered for allotment,” said an investment banker. Officials representing SBI Cards, investment banks handling the IPO, Sebi, and RBI are likely to meet on Monday to find a solution to the problem.

Sources say two options are on the table. The first includes seeking RBI’s approval to allow usual fund transfer as the application amount for the IPO has already been set aside under the so-called ASBA process before the moratorium was announced. 

ASBA or Applications Supported by Blocked Amount is the facility under which the money remains blocked in the account till the time the allotment is finalised. 

According to the people in the know, the second option is that allotment process takes place normally but YES Bank clients, who get an allotment, are asked to pay through alternative banks.

Market players say it is unlikely that the RBI would approve of the first method and the second method also could pace operational difficulties. 

“The second option looks more viable. However, bankers will have to ensure that the IPO process doesn’t get prolonged. One tweak could be that the shares are kept in a separate account till the time these investors pay, so that the listing process doesn’t get delayed. However, here the risk is if the shares list at a discount, these investors may not pay,” said a person privy to the discussions.

The legal implications of these two options are being vetted, says an investment banker. Shares of SBI Cards are likely to list on March 16. The allotment could be finalised on Wednesday and the payment process is expected to complete by Thursday and a day later, shares would reflect in individual demat accounts. Sebi has brought down the time gap between closing of an IPO and listing of the securities to just six working days.

Sources say nearly Rs 1,500 crore worth of applications are impacted by the crisis at YES Bank. Also, 6,000 retail investors have used PhonePe UPI for payments. The digital payment application had suffered an outage as its banking partner is YES Bank. However, PhonePe is said to have restored its services.

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