On Monday, YES Bank‘s shares dropped by 13% to hit an eight-month low of Rs 14.40 on the Bombay Stock Exchange (BSE) as the lock-in period of three years, which was placed under the Reserve Bank of India‘s (RBI) reconstruction scheme 2020, ended that day. The stock was at its lowest level since July 2022 and had corrected 42% from its 52-week high level of Rs 24.75, which was touched on December 14, 2022.
The ‘YES Bank Limited Reconstruction Scheme, 2020’ (“Scheme”) was approved by the Central Government and came into force on March 13, 2020. YES Bank informed the stock exchange on Sunday, March 12, 2023, that the shares would get released through the automated system of depositories by Start of Day (SOD) on March 13, 2023, without any further action required from the Bank.
As part of RBI’s Reconstruction Scheme 2020, State Bank of India (SBI) initially infused capital of Rs 6,050 crore for around 48% stake in YES Bank. The minimum price under this scheme was Rs 10 per share, and it also contained a lock-in period of 3 years until March 2023 for all investors, during which no one could sell old shares in the secondary market. Additionally, under this scheme, SBI had to hold at least 26% until March 2023.
SBI’s original 48% stake has reduced to around 26% as of December 2022 due to fund raising dilutions over time.
According to analysts at ICICI Securities, YES Bank has witnessed a gradual improvement in business growth as well as asset quality in the last 6 quarters. Recently, the bank has concluded the sale of stressed assets to JC Flower, which has led to a substantial reduction in GNPA to 2%.
Going forward, the bank is poised to see higher advance growth, driven by granular retail assets, as it concluded Rs 8,900 crore of capital raise from Carlyle and Advent. Focus on growth along with margin improvement may enable the bank to improve its RoA to guidance of ~0.9-1% in FY25. However, earnings could remain volatile on a quarterly basis due to the Security Receipt (SR) of Rs 3,770 crore (from the sale of stressed assets of face value of Rs 6,800 crore) and ageing on the same, according to the brokerage.
Near-term risks include the decision to write down AT-1 bonds being challenged in court, which is currently stayed, and supply overhang post expiry of stock lock-in. The consistency of controlled asset quality holds the key for the stock, the brokerage added.
As of 01:40 pm, YES Bank was quoting 4% lower at Rs 15.83 on an over two-fold jump in its last two-weeks average trading volumes. A combined 520 million equity shares representing 1.8% of total equity of YES Bank had changed hands on the NSE and BSE. In comparison, the S&P BSE Sensex was down 1.2% at 58,448.