What’s Next for Yes Bank?

Shares of Yes Bank surged as much as 38% on Thursday following a statement by the bank that they had received a binding offer worth $ 1.2 Billion from global investors as a part of its efforts to raise funds.

The bank had earlier stated that they were in advanced talks to raise funds from Global and Domestic Investors. The current offer though, is subject to Regulatory, Board and Shareholder approval. The Bank plans to raise funds through Fresh Issuance of Equity Shares.

Shares of Yes Bank have been in a freefall since last year tumbling from Rs. 393.20 in August to an all time low of Rs. 29.05. Its market cap declined to below Rs. 8,000 Cr. during the same period. The Share has collapsed 84% from the start of this year alone.

The heavy selling pressure came amid Worsening asset quality of the Bank, Higher Provisioning and inability of the Bank to raise Capital. The share shot up as much as 39% during intra day trade to Rs. 76.65 and settled 23.77% up at Rs. 70.30.

The fresh Equity Injection into the bank still remains subject to approval by the RBI due to certain constraints. The total amount of $ 1.2 Billion translates into a 33% stake in the Bank based on Earlier Valuations. Based on the RBI guidelines, no Single Shareholder is permitted to hold more than 10% stake in a Private Sector Bank.

In the March quarter, Yes Bank had reported a massive quarterly loss of over Rs. 1,500 Crores, amplified by provisions against bad loans, as the lender’s first non-founder CEO Ravneet Gill began animmediate clean up of the Banks Loan Book.

Ever since Gill took over as CEO in March, 2019, he has been trying to clean up the books wherein the Gross NPA Ratio shot up to around 5%. Previously, Yes Bank had managed a Capital Infusion of Rs. 1,930 Crores via a QIP (Qualified Institutional Placement) to investors including BNP Paribas Arbitrage and HDFC Balanced Advantage Fund, etc at Rs. 83.55 apiece.

The Bank is set to post its Quarterly Results on November 1. The fresh Capital Infusion, if approved by the Central Bank, will relieve both the Investors as well as the Management which has been reeling under Financial and Regulatory pressure. This Injection comes as a sentiment booster for the investors and relieves them of some of the pressure which they had been facing for a while now.

Will this Investment go through and put Yes Bank right back on its Growth Trajectory or will the Central Bank intervene and put a stop on this deal? The future of the Bank and the Stock depend heavily on this deal. What is in store for the Bank and its Investors remains to be seen.

Until Next Time…