YES Bank share price rose over 4% amid a falling market today after the private sector lender said its board of directors would discuss and consider raising of funds in a meeting to be held on January 10. Sensex and Nifty opened lower amid escalating tension between US-Iran. Sensex fell 294 points to 40,574 and Nifty started 100 points lower at 11,939.10.
YES Bank share rose up to 4.10% to Rs 46.95 compared to the previous close of Rs 45.10 on BSE. However, YES Bank stock has lost 75.77% in last one year.
YES Bank in a communication to bourses said, "Notice is hereby given that a meeting of the Board of Directors of YES Bank Limited ('the Bank') will be held on Friday, January 10, 2020 at Mumbai, inter alia, to discuss and consider raising of funds by issue of equity shares / depository receipts / convertible bonds / debentures / warrants / any other equity linked securities, through permissible modes, subject to necessary shareholders/ regulatory approvals, as applicable."
Rahul Agarwal, Director at Wealth Discovery/EZ Wealth said, "We expect share price to remain under pressure amid the continuing weakness in asset quality and uncertainty around raising of fresh capital. Only a substantial capital raise may provide cushion to absorb any increase in risk weighted assets and assist credit growth. YES Bank is currently in a precarious position with an existential crisis looming at large. We advise investors to stay away from the counter still more clarity emerges. For existing investors in the stock, it is advisable to stay invested with a longer term outlook and desist from any fresh buying for rupee cost averaging purposes."Share Market LIVE: Sensex slips 300 points, Nifty at 11,945; PSU Bank shares decline
The private sector lender has been scouting for funds since its core equity capital is barely above the regulatory requirement of a minimum of 8 per cent. The lender needs to raise funds to provide for bad debts and expanding lending operations.
On December 17, YES Bank CEO Ravneet Gill said the lender was on track to raise the much-needed capital by the end of this month.
In December end, Gill said the private sector lender would soon complete its capital raising process. Gill assured that it is just a matter of time before we have capital.
Vikas Jain, senior research analyst at Reliance Securities said, "The stock is trading volatile with respect to the news flow of capital raising. It is trading at 8% discount in futures as huge shorts being created. It has good support near 37-39 levels from where we expect some pull back."
The private sector lender been in trouble since August 2018 when RBI refused to grant an extension to co-founder and chief executive Rana Kapoor. The stock price stood at Rs 343 during August-end. The stock has fallen 86.88% since then.
After the shareholder's extension to Kapoor's tenure in June, the private sector lender waited for RBI's final stance taken by sector regulator on the reappointment of its CEO Rana Kapoor whose term ended on August 31, 2018.
On August 30, RBI approved reappointment of Rana Kapoor as managing director and CEO till further notice from the central bank. The stock closed over 5% or 18.50 points lower at 343.40 level on August 31, 2018 as the RBI did not approve a full three-year extension on the CEOs tenure.
The exact reason behind RBI asking Kapoor to quit was unknown. During that year, the apex bank had gone tough on lenders for rise in bad loans and divergences in the reported figures.
YES Bank reported gross NPAs for FY17 at Rs 2,018 crore. However, gross NPAs of the private sector lender were estimated to be Rs 8,373.8 crore by the central bank. The resulting divergence was nearly three times the reported amount.
On September 21, 2018, YES Bank stock crashed in early trade after RBI cut the tenure of its founder and CEO Rana Kapoor till January 31, 2019. Kapoor was given three-year extension by the bank's shareholders in June, but the central bank had not specified the exact period of his tenure.
YES Bank stock tumbled up to 34.03% or 108 points to Rs 210.10 on BSE.
The lender's board sought approval from RBI for extension of Kapoor's tenure but the same was declined on October 17, 2018. Since then share price of YES Bank has been falling on earnings which fell below expectations and a series of downgrades by credit rating agencies. The bank has been looking for investors to fund its growth but has failed to disclose the names of credible investors of late.
On November 30 last year, YES Bank in a filing to the bourses disclosed the list of potential investors willing to infuse funds into the bank.
The bank mentioned entrepreneur Erwin Singh Braich/SPGP Holdings as a key investor with whom talks were ongoing and expected to be concluded shortly. Hong Kong-based SPGP Holdings/ Erwin Singh Braich committed nearly Rs 8,600 crore ($1,200 million) to the bank.
Other parties who showed willingness for fund infusion, according to the bank, were Discovery Capital ($50mn), GMR Group and Associates ($50 mn), Rekha Jhunjhunwala ($25 mn), Aditya Birla Family Office ($25 mn) , Ward Ferry ($30 mn) and Citax Holdings Ltd and Citax Investment Group ($500 mn).
On December 2, the bank said that Capital International, part of the $1.87-trillion US-based Capital Group, has committed to invest at least $120 million in the private sector lender. On December 10, the lender after its board meeting said it would consider investment offer of $500 million from Citax Holdings and Citax Investment Group, adding that it would continue to evaluate other potential investors to raise capital up to $2 billion.
The private lender said that the binding offer of $1.2 billion submitted by SPGP Holdings and Canada's Erwin Singh Braich, which accounts for 60 per cent of its planned $2 billion capital raising, would "continue to be under discussion".
On December 2, the bank said that Capital International, part of the $1.87-trillion US-based Capital Group, has committed to invest at least $120 million in the private sector lender.
On December 10, the lender after its board meeting said it would consider investment offer of $500 million from Citax Holdings and Citax Investment Group, adding that it would continue to evaluate other potential investors to raise capital up to $2 billion.
The private lender said that the binding offer of $1.2 billion submitted by SPGP Holdings and Canada's Erwin Singh Braich, which accounts for 60 per cent of its planned $2 billion capital raising, would "continue to be under discussion". Its stock price fell up to 20% intra day to Rs 40.70 compared to the previous close of Rs 50.55 as the bank deferred the final decision regarding allotment of shares to next board meeting. The lender did not disclose the date of the meeting.
By Aseem Thapliyal