Yes Bank and Its Unending Dry Spell for Valuation

Yes bank has been one of the most interesting case studies since the last 2 years. The reason behind this is the scam created by Rana Kapoor and his partners towards the depositors. Yes bank was formally known for its international class facilities and customer friendly environment. The bank was having the best operational facilities for customers which influenced the depositors to move towards it. The depositors were not only leaving the best banks for it but also providing mighty deposits given its rate of return on savings at that time period. The bank was among the primary players to initiate the two factor authentication, voice responsive systems, radio frequency identification and all such features. 

It not only converted the common people to be its customers but also turned on many major private groups to opt for its services. The companies such as Swiggy, PhonePe, redbus, Flipakart opted for Yes bank. Slowly the bank’s deposits kept on increasing and went on to 2 Lakh Crore Rs. 

Fall of Yes Bank

However this great story had a very unexpected fall. The bank was high on NPAs. The founder and MD Rana Kapoor kept on lending money to stressed companies such as Deewan Housing Finance Limited, ADAG backed Reliance Group, IL&FS Group, Zee Group etc. All such companies kept on increasing the bank’s NPA numbers. The shown numbers for the same were close to 51000 Crore Rs initiate. However the bank was just warned by the RBI about the same. When analysed again the stressed companies were lent even more money. 

In 2014 the amount was close to 51000 Crore Rs which Grew to 2 Trillion Rs. This resulted in such a situation for the bank that for one point the bank was giving out more loans than its deposit rate. Thus all the numbers went wrong and the bank was under a major stress of debt. 

Ratio and Performance

The bank reported the lowest PCR across the segment that year at 43.1%. The ratio is kept at 70% minimum by the RBI. The CDR on the other hand was rising. It touched 106% which is highest ever by any Indian Bank. The profits kept on sinking down given the defaults of loan interest payments. Due to all such factors RBI launched an official investigation into the bank and found the entire scam. Later on Rana Kapoor was removed from the company. While all this was happening the promoters ppt on dumping the stock.

The stock dump caused the bank’s valuation to decrease from a high of 1400 Rs per share to 5 Rs per share. Today’s trailing share price is close to 14 Rs per share. With all these govt. Put a restriction on withdrawal so that people don’t make the bank run out of money overnight. Also the govt. Rapidly came up with a solution where all the Indian banks and major players of the world riveted into the bank. 

The funding round was led and it rendered close to 15000 Crore Rs as its capital. The institutions in the same scenario are Bandhan Bank, SBI Bank, HDFC Bank, Axis bank, ICICI Bank, LIC, Kotak Mahindra and many more. Thus the govt. Has been trying to bring the bank back on its feet ever since.

The Dry Spell

Yes Bank showed a mighty fall from 1400 Rs to 5 Rs when the news of the scam hit Dalal Street. However the volume in the bank’s trading sheet has been on the rise ever since. The Bank’s value went close to 70 Rs within 2 weeks of hitting 5 Rs per share due to the resolution plan by government and RBI. However the share prices went down again to get stabilised. The share price has been moving in the range of 10 to 15 Rs since then.

It has been more than 1 year since the news of the scam hit Dalal Street. However the shares are showing no further upgrade in valuations. The reason behind the same is the bank’s poor performance in comparison to industry standards. However the bank has been trying to get back on its feet with multiple deals. The recent deal was a partnership with FidyPay, a fintech firm.

The stock price is expected to go up given the multiple speculations that the market participants are having about the bank. The sale period for Yes bank shares from the investors of 15000 Crore Rs funding is going to get a freeze uplift in 2023. So people are expecting that the share price will be close to 70 Rs till then. Also there is news that the Adani Group can be after the takeover of the bank to enter the financial business segment. However, all such news has no solid credibility. But one can definitely expect the share prices to go up in a year as the dry spell by Yes bank has been driving every retail investor crazy.